A life insurance policy is a legal contract between an insurance provider and an individual looking to get financial coverage for their dependents in case of death. Each life insurance policy is different, as are the regulations surrounding insurance plans for each jurisdiction.
Types of Life Insurance Policies
There are two most common kinds of life insurance: term life insurance and permanent life insurance. A term life insurance policy coverage lasts for a predetermined number of years, usually between 10 and 30. However, it doesn’t have a cash value. Once the term is over, there’s nothing behind. On the other hand, a permanent life insurance policy covers your entire life coverage. It features a cash value component that ensures coverage continues as long as the insured person lives, provided premiums are paid, and offers other financial benefits. While some of your premiums may increase due to taxes over time, the whole death benefit is payable from the first day of your policy’s commencement. Although, the cash value might take a while to grow to a significant amount.
How It Works
You purchase insurance and timely pay the monthly or yearly fees (also known as premiums). If you pass away, the insurance company pays the predetermined amount of money to your family or whomever you designated as the beneficiary. Also, there’s an option to receive the money in a lump sum or installments (annuity).
Why Is a Life Insurance Policy Important?
Many people mainly link life insurance with emergency planning and perceive it as financial support that is only beneficial in the case of tragic circumstances. Although this may be somewhat true, life insurance serves other important purposes, making it a flexible addition to your financial portfolio. Life insurance is an excellent foundation for financial management and investment. It’s an autonomous opportunity that encourages stability, independence, and a sense of security.
If you’re looking to safeguard your financial security, especially for the people who depend on you, life insurance can be a powerful tool. Having life insurance is essential no matter where you are in life, whether you are a youngster, a senior professional, or the primary breadwinner of your family.
But before you get a policy, it’s important to evaluate your current situation and determine what kind of financial security you really need. Consult a reliable financial advisor if you need help assessing your options. A financial representative can listen to your concerns, explain how you can meet your needs while staying within your resources, and support you in making a final decision. You can also use an online term life insurance calculator to acquire a quick quotation.
Who Gets the Payout?
The beneficiaries you designate in your life Insurance policy will receive the policy’s benefits in the event of your death. Here’s a list of the most common potential beneficiaries:
- One family member or multiple people from your family
- A trust you’ve established
- A charitable or non-profit institution
- Your estate
For instance, if the beneficiary you designated isn’t alive in the event of your death, your payout will go to your secondary beneficiary, which you also have to mention in your policy documents. But if the primary beneficiary is alive, the secondary beneficiary gets nothing.
The Bottom Line
It is never simple to think about death, and there never seems to be a good time to begin discussing it. However, taking the lead and exploring your life insurance alternatives is essential. Having a plan in place may be quite valuable, as we all want the best for our loved ones.
Our life insurance attorneys will help you fight your denied life insurance claim.