Life insurance is something that’s quite important to opt for because of various factors. We know that nobody is going to live forever, right? Well, our life is extremely unpredictable and therefore we don’t know what our life holds in the future. Just like a candle, it can go off anytime and that’s why we need to mentally prepare ourselves. Similarly, we can go on to live numerous decades and enjoy our life to their fullest. We can enjoy our retirement with friends and family and see a lot of wonders of the world with gleeful eyes.
In other words, we can enjoy our wealth and prosperity without having to worry about the future.
However, as we said earlier, life is completely unpredictable. Therefore, we need to take some measures and think of our family members as well. If for some reason we don’t live that long, then what will happen to those whom we leave behind? This is the reason why a lot of people prefer to sign up for life insurance. A good policy as such can make big difference to the survivors at times. However, it’s also true that this insurance is not for everyone.
So, if you wish to have a clear idea about this insurance policy then you are at the right place. In this article, you will know everything there is to know about this type of insurance. Moreover, we will also share the people who are likely to get benefitted from this type of insurance. In other words, you will get a comprehensive idea of the policy.
What is Life Insurance?
So, you may wonder, what is life insurance in the first place, right? Well, it’s complete security that the policyholder provides to the lives of their family members. As we said earlier, our life is fleeting and if an accident occurs then we have to think of the survivors beforehand.
Therefore, we can say that life insurance is a type of contract between an insurer and a policyholder. In this type of contract, the insurer promises to pay a sum of money upon the death of the policyholder. So, they pay the money to the family members or to the person the policyholder had assigned in the contract. Depending on the contract, apart from accidental death, some sort of terminal illness can also trigger the policy.
Is It Really Worth to Get a Life Insurance?
Well, you may have a question in your mind about whether it’s really worth signing up for such a policy. Well, if you have dependents or family members then it’s absolutely worth signing up for. In fact, it will provide you with peace of mind as well knowing that your family members won’t have to go hungry in case something happens to you. Circumstances can be cruel and therefore we need to take proper measures.
For life insurance, you need to pay a certain sum of money every year to the insurer. This will enable the insurance scheme and provide you security in case the worst case happens.
So, is life insurance worth it? well, we can say that this type of insurance is worth it and you should opt for one as soon as possible.
A Few Benefits of This Type of Insurance
There are different types of life insurance available. So, you have to know the one that suits your purpose. A lot of people like to opt for short-term insurance while others may also opt for long type ones. Irrespective of the type, there are numerous benefits if you opt for life policy insurance.
The insurers have designed this policy to give your family and close one’s financial security after your death. As we said earlier, each different type of policy may have other benefits. So, now’s the time to check a few benefits of this insurance.
1. It Can Provide You with Peace of Mind
One of the sole purposes of this insurance policy is to provide you with peace of mind. As we have already stated above, the purpose of this insurance is to give your close ones, such as family members security. In your absence, they will get complete financial security if you have signed up for the insurance. So, in other words, they will maintain a comfortable living standard in case you die.
Any type of life policy insurance can help provide this benefit and this is the main reason why one would opt for this in the first place. The insurers haven’t designed this death benefit to make the heirs rich. However, it can ensure that the necessary stuff is taken care of.
2. Tax-Deferred Growth
You will need to pay a higher premium if you do have a permanent insurance policy. However, there’s a reason for this high premium as well. For example, the policy will set aside a portion of that premium in a savings vehicle for your family.
So, as long as you continue to pay the premiums, the policy will remain active and the savings will continue to grow as well. In other words, it will act as an interest. Moreover, it’s also worth noting that the interest rate will be relatively conservative. So, we can say that this is a safer way to save a few bucks with minimum risk.
3. Borrowing Cash Value
Borrowing cash value is another thing that makes this policy so good. So, once you have a sufficient amount of money saved up in your insurance policy after a decade or so, you can borrow that money in case you need it. For example, let’s say you have had the policy for around 20 years or so. In that case, we can assume that you have accumulated enough money to pay for your child’s tuition.
However, it’s also important to keep in mind that the money that you will borrow from cash value will subtract from death benefit as well. Therefore, you need to make sure that the withdrawal money will not affect your close ones. Otherwise, you might lose some money.
Different Types of Life Insurance Policies That are Available
Now that we have a sufficient idea about the life insurance policies, we can categorize them into two parts. While deciding on the life policies, it’s crucial to make sure that you have a complete understanding of the policies. In order to have a knowledge of the policies, you need to read the facts clearly. There are various variations of the insurance policies but generally, they fall into two categories as we just mentioned above. They are permanent and term insurances, respectively.
Term Life Insurance
So, from the name itself, we can get an idea about this insurance policy. The policy developers have designed this type of insurance to cover for a set period of time. For example, a person can purchase a 20 year or even 30-year term life policy if they wish to.
In fact, it’s worth mentioning that these policies function almost similar to other types of insurance policy, like car insurance. So, you need to pay a premium each month and if something bad occurs (like accidental death) then your close ones will receive the benefit money.
Permanent Insurance
On the other hand, we have permanent insurance for life policy or whole life insurance. Just like the previous one, we can figure out this one as well from the name itself. Just as the name suggests, this permanent policy covers a person for their life as long as they pay the insurance money.
In fact, it’s also worth noting that certain types of whole insurance can have a component that allows the policyholders to accumulate cash value. So, when the insurers advocate for life policy insurance as an investment, they refer to the cash-value component. Moreover, it’s good to know that term insurances are generally cheaper than whole insurance or permanent insurance.
Do You Need Insurance? Check This Out
Not everyone requires this type of insurance. There are people who don’t have any dependents so whom they’ll nominate? Same way, buying insurance for your children can also be a bad investment as a lot of people have suggested. Well, they don’t bring any income being a child. Moreover, we know that signing up for this insurance means that you replace someone’s income. So, since a child doesn’t provide any money, it won’t have any value for you.
A Few Factors to Consider before Signing Up for The Policy
There are a few things that you must keep in your mind before you sign up for a life insurance policy. Signing up blindly is never an option and something that you shouldn’t do as well. So, let’s check out a few options that you can consider while deciding on the type of insurance that you need.
1. Premium Cost
The cost of the premium is something that you need to check. Since it varies with the age of the policyholder and depends on the insurer, you need to set a few available options. Therefore, you need to price around and get multiple quotes to arrive at the best deal.
2. Term Length
Do you need whole life insurance or term insurance? Well, this is something that you need to decide before opting for the insurance policy. Of course, in term insurance, there are different lengths. For example, they can range from 10 to even 30 years. The longer the term the higher the premium rates are going to be.
3. Adjustment of the Policy
In some cases, you can adjust the policy to your liking. Moreover, you can also cancel it anytime you like. Therefore, go with the insurer who provides you with that flexibility.
Final Thoughts
So, hopefully, you have gotten a comprehensive idea about life insurance policies in this article. The future is never predictable and that’s why we must stay ever-vigilant. This is the reason why opting for such insurance is pretty much vital.
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