Hi there! It is with great joy that i unveil this blog for the main purpose of giving you the important information on many types of insurance policies.
It is a great thing to get insurance for your household and secure your future, but it is a greater thing to get your desired information from an exceptionally brilliant and cool source, which is this blog. So, make sure to come here if you're in search of important info on your desired insurance.
I write on various types of insurance, but this writeup, as indicated by the topic, is based on Life insurance. Do well to follow the train.
On this article, I'll be talking about;
• What is Life insurance and how does the policy work?
• Types Of Life insurance
• When exactly to get Life insurance
• Available Life insurance Payout Options
• Who Needs Life insurance?
• Which Life insurance Payout Option is The Best?
Now, let's get started.
WHAT IS LIFE INSURANCE AND HOW DOES THE POLICY WORK?
Life Insurance is a type of insurance policy that provides financial protection for your family after you have passed away. Your family will be given money to use as they see fit, ensuring their financial security in that given difficult time.
Basically, the life insurance policy works like an auto insurance or a homeowners insurance: You pay a premium annually in exchange for a certain amount of financial coverage. If it eventually happens that you pass away while the policy is still active, your family(beneficiaries) receive a financial compensation which is equivalent to that same coverage amount you were paying for while you were alive.
Mainly, the difference between this life insurance and other types of insurance is that some of the other insurance policies allow the participants to accumulate cash value on policy, which they can use in few different ways.
TYPES OF LIFE INSURANCE
Basically, there are two main types of Life insurance policies in existence.
They are;
•Term life insurance
And
•Whole life insurance.
Let's talk about them.
• Term Life insurance
This type of life insurance policy was brought into existence for the purpose of providing financial coverage to the participant's beneficiaries for a set period of time. This period is typically between one year to 30 years.
The premiums paid are usually the same for the duration of the policy, and the policy pays out a death benefit if the participant passes away during the policy duration.
No cash value is also earned in this type of insurance policy. A payout only takes place when the participant dies, this making the policy similar to other forms of insurance policies.
• Whole Life insurance
This type of insurance policy is the most common form of permanent life insurance. As the name implies, the term of this insurance policy continues as long as you are alive and keep up with the scheduled premium payments.
The cash value on this policy builds up while you live, and you can withdraw the funds for personal use or borrow against this amount.
It is important to note also that withdrawing funds lowers the death benefit, and if the cash value reaches zero, you will have to cancel or surrender the policy. You can also increase the death benefit by trading in the cash value you have in the policy.
WHEN EXACTLY TO GET LIFE INSURANCE
Well, anytime is a good time to get life insurance, but the perfectly important times are during life events such as when you bought a new home, you just got married, you're expecting a baby, or other important lifetime events.
AVAILABLE LIFE INSURANCE PAYOUT OPTIONS
To get the death benefit, beneficiaries of a particular participant's life insurance policy have to file a claim.
Many insurance companies process the claims within a few days or weeks at most after receiving the completed claim form and a registered certified copy of the participant's death certificate.
The Company, however, could have reasons to believe fraud may have occurred when the policy was issued if there is a request for death benefit when the policy was recently purchased, and this could lead to a delay in response.
Once the claim is approved by the insurance company, the beneficiaries choose how to receive the death benefit.
Mostly, the death benefits are being paid to the beneficiaries in one of the following options:
• Lump- sum fixed Amount
• Specific income Payout
• Annuity
• Retained Asset Account
Let's take a brief look at each of them.
• Lump-sum Fixed Amount
This option makes it possible for the beneficiaries who select it to be paid all at once. They are paid the entire death benefit in just one payment.
This happens to be the most selected out of all other payout options. However, it can be risky if the funds are not managed appropriately. This is because the Federal Deposit Insurance Corporation only covers up to $250,000 bank account balances, so it is necessary to place the funds in various bank accounts if the payout exceeds this amount.
• Specific Income Payout
In this payout option, the beneficiaries can alternatively choose to receive a set amount of installments of the death benefit over a period of time to prevent the money from running out too fast. For a proper example, the beneficiaries can request to be paid $20,000 each year for 20 years if the death benefit was $400,000. The funds will be held by the life insurance company in an interest-earning account and they will owe taxes on the interest earned on the balance.
• Annuity
This option is also known as a life income payout.
It grants the beneficiaries guaranteed payments for as long as they live.
The life insurance company uses the beneficiaries' ages as at the time they filed the claim and the amount of the death benefit to determine the amount they would be paid.
By the time the beneficiaries pass away, if any amount of the death benefit is remaining, it goes back to the insurance company unless the beneficiaries opt to receive the annuity payment for a set period. In this case, whatever is left will go to the designated beneficiaries.
• Retained Asset Account
In this type of payment option, the policy proceeds can be placed in an interest-bearing account. The beneficiaries recieve a checkbook if they need access to the funds. Also, tax can be placed on any interest earned.
The life insurance company guarantees the complete payout of the funds in the insurance account, even if it exceeds the $250,000 limit set by the Federal Deposit Insurance Corporation.
WHO NEEDS LIFE INSURANCE?
In my opinion, it is a very wonderful thing to have a life insurance. It has tons of benefits for you and most importantly, your family.
It can give your family and loved ones peace of mind in the event of your passing, it can help cover your outstanding debts that you may have cosigned with a spouse(if you have any), it can also help cover your final expenses, which includes the cost of your funeral, among other costs associated with caring for the people that solely depend on you.
However, in the course of being single and having no dependent, saved up enough money for any final expenses and debts after death, life insurance policy may not be necessary.
Life insurance is strongly important to you if you are;
- The sole earner in your home.
- An always-at-home parent who handles most of the child care and housekeeping duties.
- A financial supporter for aging parents.
- A provider of financial support for your spouse.
If you partake in any of the duties i mentioned above, you should think about getting a life insurance.
If you decide to get a life insurance, you should consult with a professional and reputable insurance agent to be educated about the options that may be available to you.
WHICH LIFE INSURANCE PAYOUT OPTION IS THE BEST?
Like i explained earlier, life insurance can help your family in covering your financial expenses successfully and filling a financial void once you pass away.
There are a lot of insurance policies to get also, and you should preferably work with a competent financial planner in order to know how much you need.
It is also important to put in mind that your beneficiaries will have the right to decide how they receive the death benefit once you're gone, so, with that being said, it's advisable to have a chat about life insurance options with your beneficiaries in order to ensure that they understand the options available to them and so that they can make a correct decision as soon as the time comes.
