Life insurance is one of the essential pillars of personal finance, which many people ignore regardless of its amazing benefits. This is because there are many confusions related to life insurance. This is mainly because life insurance’s complicated working but before you jump to buy or start your life insurance comparison today, following are the few things one must know about life insurance.
- Life insurance becomes compulsory if there are people relying on you financially. There is no surety of life and death therefore, if you have some loved ones behind you then life insurance becomes vital. If you have siblings, spouse, kids or any related person who you support then there must be some financial assistance even if you are not there. For such purposes, having a lif insurance in important.
- Life insurance does not simply apply a financial value to someone’s life. The life insurance will assist to compensate for the unavoidable monetary consequences which comes along the loss of life. It will help the survivors to cover the costs of debts and mortgages, planned educational expenses and lost income if seen strategically. However, most importantly, in the aftermath of a sudden death, life insurance can help with the financial issues at a time when surviving family members are dealing with the loss of a loved one.
- Life insurance is a contract between two parties but is usually referred as policy. The policy is a contract between a client and an insurance company. The insurance company demands for the premium on annual basis or once at the time of buying the policy which is also referred as death benefit. The difference between the premium taken by the insurance company and the claim paid is the profit company earns.
- Life insurance policy involves four main participants. These roles belong to the insurer, owner, insured and the beneficiary. The insurer is the insurance company which is responsible for paying out claims in the case of death. The owner of policy is the one responsible to deliver payments on time. The insured is the person upon whose life the policy is based. The beneficiary is the person, trust or other entity due to receive the life insurance claim in the case of the insured’s passing.
- Life insurance is not an investment but a risk management tool. While some of the insurance policies have investment feature which can offer a degree of tax privilege. There’s usually a better and efficient tool for financial task you are trying to accomplish.
- Life insurance is divided into two main varieties which you should always keep in mind: term and permanent. Term life is the easiest, least expensive and the most widely applicable. In the term life, a life insurance company bases the policy premium on the possibility that the insured will die within the stated term. On the other hand, permanent life means there is same life and death possibility.
