Life insurance is simply a legal contract between an insurer and an insurance covered individual, in which the insurer promises to cover a designated beneficiary an agreed amount of cash upon the demise of that insured individual. Depending on the contract, the insured may also be entitled to certain events like critical illness or terminal illness that could cause death. The beneficiaries are usually dependents of the insured. This type of policy can also be used to provide funeral expenses and leave the family members with financial means after the loss of the insured.
Life insurance may either come as term insurance or permanent insurance. In the former, the insured pays premiums once a year until the policy expires while in the latter, the premium is paid once and the insurance is in effect for the rest of your life. The premium amount depends greatly on the risk of the risk category in which the company may choose to issue the policy. The insured person’s health plays an important role in determining the premium amount that the company may charge.
Life insurance policies offer many advantages for the policyholder. A plan can help the policyholder meet various financial needs like estate planning, college education, mortgages, child marriage and pregnancy expenses. This policy helps families, as well as individuals, secure their future financially. The policyholder has many options to choose from. There are so many policies available, it may be difficult for the policyholder to choose from the whole lot.
Unlike mortgage loans, life insurance never needs to be paid back. This is one of the most attractive benefits of this type of life insurance. The insured person is never forced to make a payment in case he/she dies. The amount left by the policyholder to the beneficiary is equal to the policyholder’s death benefit. The beneficiaries can be anyone. The only condition that the insured person has to follow is that the beneficiary must not unreasonably discriminate or take advantage of the insured.
Term Life insurance policies offer two basic types of protection. These policies are renewable term and non-renewable. In the former type, policyholders can renew the policy for additional periods by paying slightly higher premiums. Both the types of policies have different payment structures.
Whole life insurance and term life insurance are two basic types of life insurance. Term life insurance polices allow the insured to borrow against the face value of the policy. However, the payment is only made if the insured dies during the period of the policy.