Learn About Life Insurance Basics
Uncertainty is the only certainty in human life. More often than not, the bolt from the blue in the form of death of an earning member of the family leaves his nearest kith and kin in dire straits especially if adequate financial back up is not in place. Today, planning for one’s after death expenses like funeral expenses and family support is being provided by many finance management agencies and companies. Amongst them, life insurance plans and coverage have a world wide market and has become more and more popular during the recent times of modern era.
In simple terms, insurance can best be described as a contract between the insurer and the “carrier” or the company insuring the person. In case of untoward death when the policy is in force, the insurer pays a tax free amount that has been agreed upon signing the contract. So, while signing the contract, you will need to specify one or more beneficiaries to receive the money. A good life insurance would do more than to just replace the loss of money due to the demise of the bread winner. It should be able to cover the funeral costs, taxes, children’s education, probate costs, house keeping costs etc, to name a few.
On broad terms, life insurance is generally of two types, namely permanent life policies or term life policies. Permanent life policies cover you for life, as long as the policy is in force. To begin with, the premiums for this kind of whole life policies are higher and keep on diminishing in the long run. Also there is an accumulated cash benefits on your policy, on which you can borrow or “cash in” by surrendering the policy if there is a need to cover retirement or child’s education. However, most financial experts rate this feature as the secondary purpose of the life policy.
On the other hand term life policies are for specific range of years like 5, 10, 15 or so and if death occurs before the term, the benefits are paid to the nominees specified in the life insurance contract. At the end of the term, the coverage ceases, unless it is renewed. It is sometimes referred to as pure insurance as major portion of your premiums are added to the coverage. So, if you are looking for the maximum benefit for your dollar, term life policies should be the way to go!
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