Life insurance is an obligatory contract between an insurance company and policyholder to pay the stated policyholder’s beneficiary a monetary sum upon the policyholder’s death. This monetary sum is referred to as the death benefit, and is intended to pay for funeral costs as well as provide a financial cushion for the policyholder’s beneficiaries. Even if an individual does not have dependents that might need a financial safety net, life insurance can still be used as a combination of an investment tool and also cover funeral expenses. The proceeds from the death benefit can either be paid in a lump sum or in portions over a period of time.
When applying for life insurance, the prospective policyholder undergoes a series of health tests in a process known as underwriting. This includes questions about lifestyle, family health history, habits, and other aspects that help underwriters determine eligibility. Furthermore, if you are interested in life insurance you should apply before 60 as it is often very difficult to qualify for older individuals.
Life insurance premiums are determined by the policyholder’s health, age, occupation, and overall likelihood to pass. The higher the likelihood, the higher the premiums will be. In most cases, a mortality table is consulted, which takes into account age, gender, and tobacco usage.
Life insurance is available in a variety of forms - the main ones being whole life, universal life, variable life, and term life.
Whole life policies consist of a flat-rate premium that doesn’t change over the policy’s duration, a portion of which pays for the insurance and the rest invested in a tax-free account. The invested cash can be left to accumulate or positioned to go towards the death benefit. The accumulated cash can be withdrawn or borrowed at any time. If the policy is surrendered, the accumulated cash is returned to the policyholder.
Universal life policies are also permanent policies, but they feature more flexible benefits, premiums, and coverage options. It is popular due to its flexibility and also has a tax-deferred cash component.
Variable life policies let the policyholder pool moneys that do not go towards the premium into various mutual funds. These funds increase in value according to market forces and have higher chances for growth. The premiums start at a low rate and gradually increase as the policyholder ages.
Term life policies have a limited policy life, consisting of an unchanging premium for a set period of time. Term life policies don’t include a cash accumulation or investment options. Term life insurance is a much cheaper option than more long term policies, although the longer the term, the higher the premium. Term life policies also come in variations for policyholders drawn to their low costs.
Annual renewal term policies last one year, and can be renewed every year. Juvenile insurance is available for minors until they are twenty-five, and covers expenses that are resultant from deaths, medical conditions, or injuries. This policy can be converted into a long term life insurance policy by the juvenile when they become wage earners or when they have dependents.
If the policyholder feels dissatisfied with their coverage, they can always purchase “riders”, which are added perks or benefits. The riders are attached with an additional premium. When the premium is left unpaid, the life insurance policy is surrendered and considered annulled.
Life Insurance options can be overwhelming and a thorough evaluation of your financial situation should be conducted before electing any policy. Contact WellPath Partners today and let us help you find a solution that’s right for you.BackNext