Of course, thinking about passing away or how it will affect your loved ones is not a warm though. Though, it is important. The loss of an income in a household can further burden your family. An effective life insurance policy can keep your loved ones financially secure while they mourn.
Life Insurance is a contract based insurance policy that you can set up with your benefits provider. Life insurance offers a lump sum payment to beneficiaries upon the death of the policyholder. Life insurance can be purchased in 2 main forms and cover a variety of needs, tailored to your health history and lifestyle.
What Is Life Insurance?
Life insurance is an insurance policy set up to provide financial compensation to keep beneficiaries secure as they mourn and deal with the loss of the insurance policyholder. Premium payments are provided through the duration of the policy. Policies are built and provided to match the specific needs of the policyholder. Term and Universal Life Insurance can be ideal for individuals with different lifestyles and budgets.
* Term Life Insurance
Term life insurance is a life insurance policy that is set for a specific period of time. The policy can remain active for a specified number of years. 10 and 20-year policies are common, though any multiple of five years can often be utilised for your convenience. Term-based life insurance is a less expensive option, but you can outlive the policy. Even policies that offer extensions can require higher rates after the initially set term.
* Universal Life Insurance
Universal life insurance lasts until death. This permanent life insurance style tends to require higher average payments than a term policy. Some policies can offer options to raise or lower your payments and future payout.
How Does Life Insurance Work?
Life insurance works by providing a lump sum payment upon the death of a policyholder. Policyholders have the policy for either a term period or for life and pay monthly premiums into the plan. If the policyholder passes away, his or her spouse, children or other named beneficiaries receive the policyÕs specified lump sum payout. Payouts do not have restricted areas to be used. They can be utilised to cover day-to-day expenses, car payments and other bills or they can even be used to pay for a funeral.
What Is Not Covered?
Life insurance policies cover (or are paid out) upon death. Though, not every instance of passing qualifies for all life insurance policies. Some policies may require certain situations or other causes of death to be omitted based on a policyholderÕs health, family history or lifestyle. As well, certain Òhigh riskÓ activities may void your life insurance policy and if you pass away while doing these activities, no payment will be required. Critical illnesses and disabilities that result in death can also be omitted if the policy does not specifically cover these areas. If your proposed beneficiary is under 18, the beneficiary will not receive the payment and rather a previously specified trustee will.
Do I Need Life Insurance?
Generally, a life insurance policy is ideal for individuals with some form of a dependent. This can be ill family members, spouses, children or others who rely on your income to remain financially stable. If you do not have any dependents in your life, a life insurance policy may not be in your best interest. Always check with an advisor to see if omitting life insurance is a good choice to make.