Insurance has become more appreciable in the world of today. In spite of this, a lot of folks still find the topic a bit perplexing. This could be due to the complexity of the terms used to describe insurance policies. It is, therefore, important that we make a rather simple approach to the topic and discuss insurance in a manner that is understandable to all.
This article is designed to demystify life insurance so as to inform the reader, in the simplest of ways, about the policy, its various types as well as the importance of life insurance policies. So, just what is this thing we keep referring to as life insurance? Well, this is a contract that is entered between individuals and insurance companies.
The contract requires that the insurance company pays the beneficiaries of the insured party a certain lump-sum of money provided that the insured pays monthly premiums. The payments to the beneficiaries are done after the insured person has died. The money received by beneficiaries is normally tax-free.
As you probably know, there are various types of life insurance policies. This is mainly for the reasons of providing individuals with diversity as each of the types will have its own terms and conditions unique from those of others. It is therefore upon the individual to pick a type of life insurance policy that they are satisfied with.
Term Life Insurance
As the name suggests, this is an insurance policy that covers individuals for a specific duration of time which can be up to 20 years. The insured individual pays regular premiums for the duration of the contract. In the case that they lose their job or are incapacitated, then the insurance company pays a lump-sum amount of money to the insured to provide financial security for them and their families.
“Term insurance policies are less costly compared to permanent life insurance policies. With term insurance, you can be able to support your family financially, whether or not you are working.” Michael Bernstein, a Las Vegas financial advisor, of Richard London Financial told us.
Universal Life Insurance
Universal life insurance is a typical permanent insurance plan that provides lifetime coverage to individuals. The premiums are higher than those required for term life insurance, but there is a certain level of flexibility in the premium rates and individuals can raise or lower the rates as they please.
Universal life insurance is ideal for the accumulation of wealth as it is basically a savings plan. In addition to this, it can also be used to provide financial protection long after the retirement of the insured party or upon death, in which case a lump-sum of money is paid to the beneficiaries.
Whole Life Insurance
This is yet another permanent life insurance policy that provides individuals with lifetime coverage. Whole life insurance is characterized by high premiums which are also fixed. Individuals willing to undertake whole life insurance policies will, therefore, have to cough up a little more in terms of premiums than individuals using term life insurance plans.
Whole life insurance can be used in estate planning as a wealth preservation plan. Individuals can also be guaranteed of lifetime coverage in addition to using the policy to accumulate savings.
The three are the common types of life insurance plans that individuals can choose from. One thing that this article needs to address is the basis for the calculation of premiums. The insurance company puts people in risk-related categories to determine their premiums. Healthier individuals often benefit from reduced premiums while individuals who are considered unhealthy will pay more as premiums.
The health of an individual is determined by factors such as overall health, family medical history, and lifestyle. All successful candidates for life insurance will fall in either of the categories; standard, preferred, and super-preferred. The premium rates paid will be increased as you move from super-preferred to standard.
Thank you to Richard London Financial, experts in Las Vegas life insurance, for their invaluable input with this blog post.