What is a life insurance policy? How is it different from any other policies offered by different insurance firms? When we talk about a life insurance policy, it refers to the binding contract between the holder and the insurance company.
The agreement is that the insurance company assures the insured to give or pay a specific amount of money to the assigned beneficiary of the insured when the latter dies. As stipulated in the contract of agreement between the parties, other than death; the payment to the beneficiary may commence once the event arises. For instance, the occurrence of a terminal disease or illness, if stated in the agreement can be a case that the payment will have to start.
A life insurance policy, is a binding and legal contract in which the terms and conditions as stipulated in the contract identifies the scope of the insured incidents. There are also limitations of the said events or happenings that will not enable the insured to avail of the payment such as a suicide, warfare combat, or being part of a rebellion or riot.
There are two identified categories of a life insurance policy. The first one is the whole-life insurance policy. This category is a type of insurance policy that is permanent in nature. It is a combination of both life insurance coverage and an investment source. This policy pays a specific and fixed cost of money on the time of your death. A portion of your premium is reserved for making value of your money from the investments created by the insurer. The value of money created defers tax every year. One good thing about it is that you are allowed to borrow money on the funds accumulated with no tax to be paid. Isn’t that great? The specified cost of premium that you need to pay does not vary all throughout the life of the policy.
On the other hand, the other category of life insurance policy is the term insurance policy. What differs from this category with the whole life category is that the term does not include the investment element. The term insurance has a specific period in paying the beneficiaries on behalf of the insured. This means that once the term ends, then the payment of premium also ends. The term policy is renewable annually and it is at the discretion of the insured to renew it or not. This can be done every year without the need of presenting the evidence needed to qualify such as having the best of health.
Basically, getting the right kind of life insurance depends on your financial capability and your health status as well. It is better if you seek the advice of an insurance agent who are experts in this field, so you will have the knowledge and information you need before buying a life insurance plan. It will be the basis of your decision whether to get the lifetime or the term.
Let us know which type of life insurance you prefer, and why?