Life insurance is an insurance coverage program that
we/people buy for themselves on through their loved ones incase
anything (death) occurs. Life Insurance just as defined already is one
of the few insurance products that we don’t buy for ourselves but for
the continuous well being of the people we love if something was to
happen to us. Frankly speaking, everyone wants to know how life
insurance really works but and at the same time, nobody seems to have
the answer. I’ve even searched online to see if I can see anything
reasonable about how life insurance works but all answers I got is quite
disappointing. Wish I can get something straight forward to tell you
but nothing, however there are three major questions people are really
asking when they ask “
How Does Life Insurance Work?” the three questions behind the question are
- What is life insurance?
- How do i get life insurance?
- What happens when i die with life insurance?
Looking at the three questions on how life insurance really work;
1. What Is Life Insurance?
Life insurance, is an insurance service that helps provide you with
your financial responsibilities in the unfortunate case of your death.
It’s a signed agreement between you and the life insurance company to
take care of the financial implications of your burial if unfortunately
you die. Now, here is the thing; the
life insurance company
will have to pay your beneficiaries the amount of coverage you applied
for in the event of your death if you agree to pay your monthly premium.
At the same time, if you stop paying your monthly premium, then they
are no longer required to pay the death benefit to your beneficiaries.
Most Life insurance companies offer many life services but its comes down two basic concept or types of products: they are
- Term Life Insurance: Term life insurance provides
temporary protection, it is the most affordable type of life insurance
because it for temporary financial responsibilities. This means if you
get a 20 year insurance term life policy, it does just that by covering
you for 20 years. Now, at the end of the term and nothing happens to
you, you can either convert it to a permanent policy or renew it for
more years.
- Permanent Life Insurance. Permanent life insurance
is the opposite of term life insurance but has a few variations. Most
permanent life insurance services like Whole Life and Universal Life,
comes with an investment aspect in the form of cash value accumulation.
These services usually tend to be 3 to 4 times as much as expensive as
the Term Life insurance option. This in part has to do with the fact
that it’s “when you die” not “if you die” life insurance and the cash
value accumulation.
At the same time, there is a less expensive
Guaranteed Universal Life service that is a permanent life insurance which focuses more on pure life protection rather than the cash value stuff. In
Guaranteed Universal Life,
any cash value that it accumulates is used to keep the premiums level
throughout the time. This service can be a better option for you if you
aren’t interested in life insurance as an investment opportunity but
focused on taking care of all of your financial expenses such as funeral
costs, hospital bills and any remaining financial responsibilities upon your death as well as leaving a legacy for your family when you are no more.
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