If you ask around, most people will tell you they have life insurance. But, when you ask a little more about it, they have very little knowledge of what it entails. So, what is life insurance in-depth, and what does it cover?
What is life insurance?
It is a type of insurance cover that provides a protection cover on the life of the insured. The insured will choose a nominee, who will receive a lump sum, should any unforeseen circumstance happen to the insured.
Types of life insurance
1.Term policy – It is the most common and inexpensive life insurance plan. Luckily, it offers a large cover but comes with considerable risk since it only provides a death benefit. The lump-sum only goes to your beneficiary, so you don’t gain from it.
2.Whole life insurance – It provides death benefits like a term policy, but it doesn’t expire. This plan offers both a fixed death benefit as well as a cash value, which accumulates over time.
Variations of life insurance
There are different variations under life insurance plans. The plan can be;
Endowment life insurance – This plan has two components; partly insurance and partly savings. A part of your contribution is used for insurance, and the rest is invested.
Once you complete paying the premiums, you, as the insured, will enjoy a maturity benefit. Sometimes, the benefit comes with periodic bonuses.
Unit Linked Insurance Plan – Like the endowment plan, it combines insurance and investment. However, you get to choose between different fund options, such as equities, debts, and funds, depending on your risk tolerance.
Factors to consider when choosing life insurance
1.Know your needs – Once you settle for life insurance cover, take time to identify your needs. For instance, how much do you want your beneficiary to receive in case your life suddenly ends?
- Choose the right policy – There are different types of life insurance like we earlier discussed. Choose the best policy for you, depending on your needs.
- Apply to get the policy – Now that you know your needs and the type of policy plan you need, it is time to apply it. When applying, fill in authentic answers for each question to make it easy to claim the policy.
After filling out the questions, factors such as age, health status, and occupation will determine the premium amount you need to pay.
- Pay your premiums – Once you get your policy, it is essential to make timely premium repayments. Regular payments guarantee smooth, uninterrupted cover. Delayed payments could attract fines, while missed payments could lapse your policy.
- Claims – In case of maturity benefits, or paying death claims, the insurance company should pay promptly. Before, insurance companies could take weeks to pay out since they receive invoices in bulk.
Now, insurance companies resort to using AP automation solutions such as Yooz to handle their invoices, making the claiming process fast and efficient.
There is a lot that life insurance can do for you. Unfortunately, a recent study by LIMRA shows fewer people are opting for life insurance.
The research further indicates that about half of the respondents would suffer significant financial impact if the household’s breadwinner happened to pass away unexpectedly.
Life insurance should be a must-have for all. The earlier you get yourself a cover, the more cost-effective it is. Having life insurance helps you save, take care of your loved one, and guarantee you peace of mind.