Lawyer, Tips

Essential Things You Need to Know About Life Insurance

 

When you purchase a life insurance policy it means that you will agree to pay a premium and the insurer will agree to pay out a lump sum benefit when you pass away. If you decide to purchase life insurance, you will agree to enter into a contract between yourself, legally known as the policyholder, and the insurer, legally known as the go-to insurance company. 

Life Insurance Does Not Have To Be Costly.

As you age your premiums will be higher because with each year added to your life you come closer to death, therefore, life insurance costs go up as we age. Insurers have access to data regarding the age at which people die. Insurers can also forecast potential causes of death. This information enables insurers to predict the average age of a man or woman at death. Therefore, when buying life insurance, take advantage of lower premiums by purchasing a policy when you are younger. 

There are Three Types of Life Insurance Policies

Basically, there are three types of life insurance policies, term, whole and universal. There are also various riders that can be underwritten as add-ons to your policy. When purchasing life insurance, your agent may introduce you to terminology that you are not familiar with but a good agent will clearly explain the terms and insurance process to help get you the best coverage possible for you and your family. Ask your agent about a universal life insurance policy.

Term Life Insurance vs Whole Life Insurance.

Term insurance is the most popular life insurance policy because term policies are what is referred to as decreasing term and the premiums are usually lower than those of other policy types. Term life insurance has nuances that are not discussed in this article however, the subject is explored further here as well as the topic of Whole life insurance. Whole life insurance provides what is called a Living Benefit, which means you don’t have to die to collect the money. Your premium payments will start to build cash value in the policy for which you are able to access when needed through a policy loan. Also, the death benefit stays consistent, it doesn’t decrease like term life. Therefore, your whole life policy will pay the same amount minus any policy loan amounts to your beneficiary. 

 

 

 

Conclusion: Insurance is a Contract Not an Investment

Life insurance is a contract wherein the insurer agrees to pay a lump sum payout of money in exchange for a premium to your designated beneficiary, as stated in your policy, in the event of your death. Make sure you consult with an agent who can provide you with clear information about life insurance contracts and riders that best fit your individual situation. Finally, realize the average cost of a funeral can run more than eleven thousand dollars and family members may rely on your income to live, so having a life insurance policy can alleviate the pressure put on your grieving loved ones when they need it most.