Life insurance can be viewed as one of the most familiar forms of insurance. This plan involves an underwriter (insurer) providing financial remuneration to a client in the event that he or she passes away. In any of these cases, there will be beneficiaries (such as loved ones) that can be financially compensated. Periodic payments known as premiums need to be made to continue the policy. Factors such as age, overall health, existing medical conditions and lifestyle habits are taken into account by the insurer. There may be times when the ultimate approval will depend upon a thorough medical examination by the provider.
The Types of Life Insurance
While there are a handful of separate subcategories, the main types of life insurance are known as whole-life policies and term insurance. Whole life tends to be the simplest to understand, as the policy will provide guaranteed protection for the life of the client. There is also a portion of this policy known as a cash value aspect. This is exempt from taxation and when the policy expires, the lump sum can be distributed to the beneficiaries in question.
Term life is another popular choice. In this case, any beneficiaries are paid what is known as the “face value” of a policy upon one’s death. However, there are limitations to this option. Most policies will have a maximum coverage period of thirty years. However, the premiums that need to be paid are often significantly lower than those associated with whole life insurance.
Things to Take Into Consideration
Determining which policy is better will involve a few important questions. What is the policy intended to be used for? What is the maximum amount that one can afford to pay each month? In particular, pre-existing medical conditions may make it difficult to secure certain packages. Habits such as excessive smoking and drinking are lifestyle habits that can make it difficult to obtain an insurer with low premiums.
How to Get the Best Deal
Life insurance is a massive industry. Therefore, a great number of providers are available. Comparing their respective rates is the first step in securing the most relevant policy. Some other worthwhile tips to consider are:
- Examining the reputation of the company in question.
- Determining the premiums that need to be paid.
- Appreciating when to choose a more comprehensive plan (situations can include a large estate, children that are dependents or a spouse).
Life insurance is an important financial vehicle that will need to be considered sooner or later. Understanding the basic principles behind the policies and comparing providers will enable the consumer to encounter the best packages that will suit extremely discrete needs.