All About Life Insurance: What Makes Them So Important
Insurance today are considered investments. It ensures that no matter what happens in the future, you will be financially prepared to face it. Life insurance is usually a part of a good financial plan. Even experts would recommend you to have this as part of your lifetime savings because it does saves your family from financial ruin in case a misfortunate event hits you. So what is life insurance?
What is life insurance?
Now, life insurance is a type of insurance that covers for loss of income in cases of death of the insured individual. Most of the times, insured individuals are those whom the family depends to or the breadwinner of the family. Life insurance is a contract between you and the insurance company wherein your insurer agrees to pay a large sum of money to your beneficiary in case something bad happens to you. As long as the contract is in effect or in other words you are paying your premiums, then your beneficiary can get the money to start a new life.
What is the purpose of a life insurance?
A lot of folks out there get life insurance coverage for different reasons. Some simply just want to provide financial security to their loved ones. If you think about it, life insurance is indeed a great help in cases of sudden death, especially if that person is the breadwinner of the family. Without life insurance benefits, the family would experience a very hard time overcoming this tragic event at the same time dealing with financial burden caused by this misfortunate event. The money that your loved ones would receive can also be used for funeral service and even to save your home from possible seizure.
Some companies also purchase life insurance as additional perk to attract more employees or to encourage them to stay within the company. Large companies and some government agencies offer life insurance for free. And if they want to widen their coverage or get additional coverage then ay simply do so and even get tons of discounts, considering that this means bundled insurance. However, if the employee resigned or was laid off, so does his or her life insurance coverage.
How much does life insurance cost?
Basically, life insurance cost varies depending on a lot of different factors. When applying for life insurance, you might be required to get a medical examination before the insurance company would issue you a quote. Factors include occupation, health status, age, etc. For example a 25 year male smoker will likely have to pay higher premium than a 25 year old male nonsmoker. While a 65 year old male nonsmoker would likely pay higher premium than a 25 year old male nonsmoker.
Consequently, a building contractor will likely pay higher life insurance premium than an office clerk. So there are factors that insurance companies consider before they come up with their price.
The life insurance cost may also vary from one company to another. Some companies consider one thing high risk while the other may not. That is why most life insurance articles you would read online would tell you to never jump into the first insurance company that offered you coverage because the rate varies widely. You may want to use life insurance calculator to determine just how much coverage you would need before jumping ship.
Life insurance options
There are different types of life insurances that companies offer. But basically there are two types namely: term life insurance and permanent life insurance. Term life insurance is a lot more popular than its counterpart mainly because it is significantly cheaper than permanent life insurance. These are ideal for those who just got a job and are just building up their career because he or she would be able to afford the premium, which is very important to maintain your coverage.
Term life insurance has no cash build up like permanent life insurance and it basically expires as you reach a specific age. At which time you may opt to get another term life insurance or renew your contract. As you become older, the premium will be a lot higher and the approval is a little tougher. It’s a good thing that in most cases when their life insurance expires, their children are full grown adults who don’t need financial protection or they have already paid their house mortgage.
Now, quality wise, permanent life insurance is the better than term life insurance because your coverage last a lifetime. No need to renew your policy or re-purchase after a few years because you will be covered for as long as you are paying for your premium. Now, permanent life insurance is a lot more expensive than term life insurance, which is why it is not very popular. But the truth is it is only because it is a good form of investment. Permanent life insurance comes in sub categories: Universal life insurance, Variable life insurance and Whole life insurance.
Whole Life Insurance
With whole life insurance, a part of your premium goes to tax free investment. The premium for this policy does not change overtime. And it allows cash build up which you can use while you are on the policy or use it to increase the death benefit life insurance calculator.
Variable Life Insurance
This type start with a very low premium which significantly increases as the policy matures. It also involves cash build up as long as your chosen mutual fund is also performing well.
Universal Life Insurance
Universal life insurance is very flexible. The policy holder may choose to increase or reduce the sum of their death benefits as well as the sum of money they wish to pay every year.
Who need life insurance the most?
Everyone who wishes to protect their families in cases of misfortunate event needs life insurance coverage what is life insurance. But those who need it the most are the breadwinner of the family, parents who have small children and couples wherein only one spouse works. But even if both of the couples have a job, it is still recommended that both of you get covered because his or her income will not be sufficient enough for just one person to support your household expenses in case of death.
