When it comes to safeguarding your future, as well as those around you, the best way is through insurance. There are many different types of insurance policies. One of the best ways to protect your family is with life insurance. While many people have this form of insurance, very few individuals actually know what it entails. There can be a lot of confusion when it comes to life insurance. The main reason behind this is due to the level of complexity with this form of insurance. The simplest way to know what you are signing up for is by contacting your insurance company.
When and why you need life insurance
When applying for your first life insurance policy, the basic question that most people tend to ask themselves is why they need it, or furthermore, when is the right time? This section will help you clear your mind. The following reasons will be able to answer the following question: Why and when do you need life insurance?
– If somebody relies on you financially. In the case that you have dependents, for instance a family, having a life insurance policy is the best way to ensure that after you pass on, they will be able to cope with the day-to-day costs of life. However, if you feel that you are financially stable and your family will not suffer financially, then there is no need for life insurance. – Job occupation. Some jobs can be highly risky, and in order to save your family from financial peril, it is advisable to opt for life insurance in order to reduce risk.
What you need to know about life insurance
In order to avoid confusion in the field, there are some key points that you should note. These points will be able to give you a brief description on what life insurance exactly is.
- Life insurance does not dictate the monetary value of the insured person’s life. It simply isn’t true that taking out a life insurance policy is exactly the same thing as putting a price on the value of your life. It simply matters on how you look at it. Life insurance is a way of safeguarding the lives of those around you. For instance, if you take out life insurance and you pass way, then your insurance will help to lessen the financial burden during the mourning period. This is the main reason as to why it is highly important for the main bread-winner of the house to take out the insurance.
- There are different roles of each player in the policy. In each policy, there are four parties involved. The four parties include: the insurer, the owner, the insured and the beneficiary. Each of these individuals has a different role to play in the life insurance policy*.
- Life insurance is not an investment. This is what most people tend to get mistaken with. This form of insurance is essentially a method of risk management. It is designed to eliminate future financial risk for your family. These are the three main points that you should learn about life insurance. It is however important to take note that when it comes to any form of insurance there are usually two main categories. They include term and permanent insurance. Term insurance is based on a set period of time. This means that the company relies on the probability that the insured might pass away in a specific period of time, for instance after 10 years. Once the set period has passed, you will need to renew the policy, and this means that you may end up making payments for nothing. This is why most people prefer the permanent form of insurance payment. Though it has a similar format, it has an added advantage since it includes a saving mechanism. It is up to the person being insured to take the time to research the best company within their location. These are some factors that you can take into consideration to guide you on this process.
*-Insurer. This is the company mainly responsible for paying out insurance claims.
– Owner. The main role is to make the premium payments to the company or insurer.
-Insured. This is the person who has taken the life insurance policy or the person whose life it is based upon.
– Beneficiary. This is the individual set to receive the insurance claim. For instance, the next of kin.