What is Life Insurance?
Life insurance means insuring your life so that in case of untimely death, your family will have the means to go on. It is a precautionary measure taken to ensure that your family’s circumstances do not change drastically and that your children’s education does not suffer.
The difference between insurance against life and life assurance has become just semantics over the years. Initially insurance against life meant that in the event of the policy holder’s death during the coverage period, his beneficiaries received the insured amount. If the policy holder survived the policy, he would not get any compensation.
However banks have over a time, in a bid to attract customers, started offering assurance policies where the customer gets his money back at the end of the policy and even in the event of cancellation.
What are the Points to Consider in Opting for Life Insurance?
Some points to remember when opting for insurance against life are the following:
The earlier one starts, the better it is, as premium rates are very low for younger people.
The term coverage should be sufficient to meet requirements in case of untimely accidental death.
Whole life insurance should be not be confused with investments. It is to be looked at only as a safeguard for your family.
Do not take your agent’s word, but check out the pros and cons before selecting your policy. The agent is going to recommend the one which will yield him the higher commission.
While deciding on the term of the policy, try and match the period when your dependents or children might start earning on their own, as until then they might need your support.
What are the Advantages of Life Insurance?
Canada Life believes that a proper financial plan can mean the difference between leaving your loved ones well-positioned financially and leaving them to cope with debts and an inadequate income. Life insurance can help create financial security for you and your family. If you should die prematurely, it can be used to:
• Pay debts and funeral expenses
• Provide a continuing income for your family
• Ensure your family has the resources to maintain a comfortable standard of living
• Leave a legacy to your favourite charity
While you’re still living, some life insurance policies can:
• Build tax-advantaged savings you can draw upon as needed for personal or business opportunities
• Supplement your retirement income or provide for long-term care or home care for yourself or a family member
How does a Life Insurance Policy Work?
Wikipedia defines life insurance as a contract between a policy holder and insurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. Depending on the contract, other events such as terminal or critical illnesses may also trigger payment. The policy holder typically pays a premium, either regularly or as a lump sum.
The policy is basically an agreement where the policy holder pays a regular premium to the insurance company. The company, on its part agrees to pay a previously agreed lump of sum to the policy holder’s estate or beneficiaries in case of his death, during the policy period. If the insured is not regular in his premium payment and the policy lapses, then the company is not obliged to pay the insured amount.
There are different types of insurance policies against life available in the market. It is the duty of the policy holder to do his research and decide on the policy best suited for his needs. Some of the types of insurance against life include whole insurance, general insurance, temporary insurance, permanent insurance, accidental death insurance etc. The policies and rates and paying out options all depend on the insurance company. Since there are many numbers of companies vying for a portion of the pie, it is truly a buyer’s market. So one has to do the research, find out all the best deals and select the most suitable one, as insuring your life is a way of caring for your family even when you are not there.
Value of Life Insurance
The value of life insurance both for the policy holder and beneficiaries is very obvious. Having been appraised of the benefits, features and functions, consumers can now be guided as to what is the most appropriate insurance plan for them.