Life insurance pays out a sum of money to the named beneficiary of the insured upon their death, providing security to family members. The cost of life insurance varies based on factors such as age, health, and occupation. Whole life, variable life, and term life are the typical forms of life insurance policies available.
Life insurance is a form of insurance that pays out of monetary income upon the death of the insured covered in the policy. Essentially, a life insurance policy is a contract between the named insured and the insurance company in which the insurance company agrees to pay an agreed sum of money to the named beneficiary of the insured, provided the insured’s premiums are paid up to date. .
Purpose
People buy life insurance policies for various reasons. Said insurance provides security to family members in the face of the loss of a loved one. For example, if the primary wage earner dies in his prime, the death benefit received from the policy will help surviving family members bear the burden of the tragic loss. The proceeds can also help pay for funeral costs when death is unexpected.
Life insurance can be purchased by individuals, but many employers also offer it as an added benefit. Many times, large employers and government employers offer group life insurance at no cost to the employee. If the employee wishes to obtain additional coverage from the employer’s insurance company, they can usually do so at reduced rates. In most cases, the insurance converts once the employee no longer works for the company.
cost
The cost of life insurance varies based on factors such as the insured’s age, health, and occupation. Essentially, the more likely a person is to die at an earlier than average age, the higher that person’s premium charges will be. For example, the premium for a 25-year-old non-smoking man in excellent health will be much less expensive than a similar policy for a 65-year-old male smoker. Similarly, a skydiving instructor would have to pay much higher premiums than a librarian.
Life insurance is available in several different forms from various companies. Each company has financial representatives who help customers select the best insurance products for their needs. Some of the typical forms of life insurance policies include: whole life, variable life, and term life.
Whole Life – With whole life insurance, a portion of each premium pays for the insurance and the remainder serves as a tax-free investment. A whole life policy sets a premium at the beginning of the policy and that premium does not change over the life of the policy. This form of insurance allows for an accumulation of cash during the life of the insured. This cash accumulation can be used over the course of the policy or simply serve to increase the death benefit at the end.
Variable Life – Variable life products start with low premiums during the early stages of the policy and these premiums steadily increase as the insured ages. There should be an accumulation of cash as long as the various mutual funds selected by the insured perform well.
Term Life – Term policies have premiums that stay the same for the life of the policy, which typically ends when the insured reaches a specified age. There is no cash accumulation in a term policy and consequently the death benefit will not increase.
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