5 Facts To Know About Life Insurance
Have you given thought to what will happen when you die? How will those who depend on you for their daily provision cope with the financial requirements that come their way when you’re no more? A life insurance policy is the answer to these questions and is something you should give serious consideration to and take up immediately.
To enlighten you more, here are 5 facts to know about life insurance:
Life Insurance Is In Itself A Contract
This contract is known as a policy. Simply defined, a policy is a contract between an individual, or entity and a life insurance company that has some financial interest in the life of an individual or entity. This insurance company pools premiums of the policyholders and later pays out claims known as death benefits to the beneficiaries in the event that the individual dies.
There Are Four Parties Involved In Life Insurance
These four parties are the insuring company, the policy owner, the insured person, and the beneficiary. The insuring company collects the premiums paid and carries the sole responsibility of paying claims in the event that death occurs. The policy owner is the one that pays premiums to the insurance company.
The insured person is the one whom the policy is based upon while the beneficiary is the individual or trust that receives the claims or death benefits in the event that the insured person dies.
There Are Two Major Life Insurance Types
These two are term and permanent life insurance. Term life insurance is the most preferred because it is simple and less expensive. For this option, the policy premiums are based on the probability that the insured individual will die within a predefined term, say, 20 to 30 years.
The premiums cover the term period after which they become too expensive to maintain. You can keep paying the now high premiums or let the policy lapse.
Permanent life insurance holds the same probability of death calculus similar to term life insurance but has a savings mechanism to it known as cash value. This mechanism is designed to make the policy endless.
Life Insurance Helps To Compensate Unavoidable Financial Trials
There are financial challenges that come with the loss of life. Life insurance helps those left behind after the death of an individual they depended upon to cater for financial expenses such as debts, mortgages, education fees, and daily upkeep.
Life insurance lessens the financial burdens that come about when the family is mourning. It gives the policyholder peace of mind that when he or she dies, the beneficiaries will not be left in a pit of financial misery. Breadwinners of a household are advised to take up life insurance.
Insurance Benefits Are Paid After The Death Of The Policy Holder
Life insurance benefits are claimed when the insured person dies. Insurance companies pay within 30 to 60 days after death when a claim is made by the beneficiaries, provided that a certified death certificate and other relevant information is provided.
There are, however, instances where insurance companies refuse to pay the benefits as agreed on the policy and this can leave you as a beneficiary suffering. But you don’t have to suffer when there is someone to help.
If you are in such a situation, you need to liaise with a life insurance lawyer to help you get paid the benefits you’re entitled to.