You may ask the question, “what is life insurance and why would I need it? I’m healthy and agile so I’m not dying anytime soon” but do you know that on the contrary Life Insurance isn’t meant for you?
Well, let’s throw more light on what exactly it is, what it entails, the benefits, and the types there are.
WHAT IS LIFE INSURANCE (LI)
Table of Contents
it is a contract between you and an insurance company to issue death benefits to your loved ones or family in exchange for your premium payments.
A LI policy is one of the most neglected policies because lots of people consider it vain and a waste of time. Well, this is because its importance hasn’t been prioritized.
Would you like to die knowing that your loved ones and family are going to suffer financially, and would be in extreme debt? Or, would you love to die assured that despite your absence, the financial problems of your household are solved?
LI is not for you, it doesn’t prevent you from dying, that is something only God can do. It is meant to guarantee the financial protection of your beneficiaries.
The loss of a loved one can be extremely traumatic especially when that was the major provider in the household. The running around for funds begins, and a state of confusion sets in because it wasn’t something planned.
An LI policy compensates for the casualty of death. With the money gotten from this plan, things like college tuition, feeding, house bills, and medical bills can all be paid for.
For an LI policy to be enforceable, the insured must give a transparent record of his present
TYPES
There are two primary types, these are:
- Term life insurance
- Permanent life insurance
These two types differ and have specific purposes, so let’s explicitly state the differences between these two and what they actually cover.
Term Life Insurance
Term life insurance is not only the most popular type of life insurance but as well the most affordable. Term LI is a policy that provides coverage for a certain period, and high-risk activities.
There are 3 categories of this type of LI, and they are:
- Decreasing Term Life Insurance –This policy is often purchased for personal asset protection, it is the least expensive. Decreasing term insurance can be likened to mortgage insurance. The difference between the two is that, with decreasing term insurance, your death benefit would reduce by a calculated percentage during every year of your policy.
- Convertible Term Life Insurance – This type allows you to convert a term policy to a permanent one. With this, you don’t need to undergo medical underwriting just to switch. However, the option of sticking with the term policy is still yours to choose, it doesn’t automatically switch policies if you don’t exercise the option.
- Renewable Term Life Insurance – This term policy allows you to renew your coverage after its expiration without having to re-apply for new coverage. With renewable LI, coverage can be renewed without a medical examination, and that is one of the benefits of this type of term insurance.
Permanent Life Insurance
Permanent life insurance is way more expensive. It is active for the entire life of the insured as long as the premium is being paid. It is a coverage that never expires, unlike the formal type.
There are four main types of permanent LI:
- Whole life insurance
- Universal life insurance
- Indexed universal insurance
- Variable universal insurance
Whole Life Insurance
This is sometimes called a “straight life” or “ordinary life” insurance policy. it gives cash value as death benefits and interest over time. This policy has no expiration date as long as the premium has been paid.
Universal Life Insurance
Universal life offers more flexibility than whole life insurance. Premiums and plans can be adjusted by policyholders. With this type of insurance, the user gets accumulated cash value which is taxed.
Universal life insurance has two components; the cost of insurance (COI) and the savings component.
Indexed Universal Insurance
Index universal insurance offers cash accumulation as well as cash benefits. It allows the insurer allocates the cash amounts to an equity index or a fixed account. IUL is considered an advanced insurance product as they are quite hard to understand but are for most business owners.
Variable Universal Insurance
Variable universal insurance (VUI), builds cash value which can be invested in several accounts which are owned by the policyholder. It is life insurance whose premium can be raised or lowered within certain limits.
Benefits
The benefits are numerous, this is why included as one of the 5 policies you should have.
Some of these benefits include:
- Life risk cover
- Tax benefits
- Death benefits
- Loan options
- Life stage planning
- Assured income benefits
- Return on investment (ROI)
These are just some of the reasons why you should get covered by this insurance policy.
So hope this article answered the question, “What is life insurance and what does it entail?” in full detail?
Know you know all about life insurance, you might want to consider including it in your insurance policies!
To stay know other insurance coverage you should have, click here
ATTENTION!!! Click here to JOIN OUR TELEGRAM GROUP, Where you can first-hand Job Alert on High paying and available Job Vacancies IMMEDIATELY
