Life insurance is basically a legal contract between an insurer or issuer and an individual insurance policyholder, in which the insurer promises to cover a named beneficiary an agreed amount of money upon the loss of an insured individual. Depending on the contract, other financial events like critical illness or terminal illness may also trigger coverage payments. If you are a policyholder, life insurance can provide you with financial assistance in times of need. However, if you are planning to buy life insurance, it is important to understand some basics about the product. If you wish to learn more, here is a quick guide to Life Insurance.
Life Insurance comes in different forms including Term Life Insurance, Whole Life Insurance, Variable Life Insurance, Universal Life Insurance, Annuities, and many others. These insurance products differ greatly in their policies, services, benefits, and costs. While term insurance is intended to cover the death benefit for a fixed period of time up to thirty years, universal, and whole life insurance products are designed to payout a lump-sum benefit upon death. Annuities offer a benefit to a beneficiary for a specified time period, while variable insurance products are designed to payout a higher amount of money over a specified period of time.
Life Insurance can be purchased from the insurance company or through a brokerage firm. Premiums are paid on a monthly, quarterly, or yearly basis, depending on your personal circumstances. Many people choose to purchase a permanent policy, which means that the policy will remain in effect throughout your life and all proceeds will be tax-deferred. A permanent policy allows the insured to borrow money that will not be taxable until distributed.
A few insurance policies allow you to borrow against the cash value, of the policy. These policies are called “tax deferred”, because the premiums are deferred until the individual dies and the insurance proceeds are received. You do have to pay taxes on any cash value that you receive. The tax-deferred policies usually provide more coverage for less premiums. Life insurance can be purchased for less money with a permanent insurance product, but they usually don’t give you as much flexibility.
Many consumers purchase term insurance policies, which pay out a benefit if the insured dies during the designated time period. During this time period, the premiums are usually fixed. If the insured dies during that period, the death benefits are paid immediately.
Many insurance companies offer both types of plans. They are very competitive, and they compete by increasing premiums and deductibles, or removing perks. They are in competition to get you to choose them as your insurance provider. Insurance companies want you to use them, because when you are a policyholder, they will always be able to pay claims on your behalf if something happens to you.
A consumer should compare the two main types of insurance available to them, permanent, and term. With a permanent insurance plan, you pay an initial premium that is locked in. The premiums can never be changed. After the initial premium has been paid, you will receive death benefits, cash values, or both, depending on your contract. Term insurance allows you to choose a level of coverage and pay a lower premium for the duration of the contract.
Today, you can get an affordable term life insurance plan for anyone who needs insurance. You don’t need to search endlessly through life insurance company websites. You can use the Internet to find low cost, high return options. This way, you can have the peace of mind of knowing that if tragedy strikes, you will have the financial security that you need life insurance to cover the rest of you family’s expenses.