The saddest part of living is leaving, but the hardest part of leaving is not giving out your best shot to the world and to the people you love. Therefore, to live and to leave is to prepare, and nothing beats thorough preparation.
Everybody wants to live, of course, and nobody wants to die. Yet, we have to accept that death is inescapable. Everybody has its time to end, but before we go, it is essential that we have carefully planned the things necessary for the ones we left.
Unfortunately, there is no definite time as when we are leaving. If it is allowed to say, death is the most unpredictable course in our life timeline. We will never know as to when it will arrive to fetch us, nor do we know how much time do we have left to prepare. So how can we ensure our departure would not be a burden?
Surely, you are already familiar with what life insurance is. Given the definition, life insurance is an agreement between the two parties, where the insurer (insurance company) guarantees to pay a huge amount of money to the declared beneficiary upon the death of the insured person (policyholder) which often the policyholder as an exchange for a premium. Depending on the policy stated in the contract, other circumstances such as terminal illness or severe diseases can also prompt payment. Further additional obligations, such as funeral expenses, can likewise be included in the privileges. The policyholder usually meets a premium, may it be periodically or successive collection, and or as one lump sum.
To understand life insurance deeper, these are the terms you need to be acquainted with:
1. Death Benefit – is the cash granted by the insurer upon the passing of the policyholder. Insurance companies are obliged to pay for the death benefit, except in specific circumstances, for example, the policyholder outlasts their term life policy or if there are policy errors and was terminated. It is also an exception if the death occurs within the first two years of coverage, and the insurance company discovers proof of trickery on the documents handed in by the policyholder. On the other hand, just to clarify, life insurance goes into effect as soon as you make your first premium payment, meaning you are eligible for the death benefit as soon as the policy is enforced.
2. Policyholder – is the individual who registers to a life insurance plan. Usually, if the policyholder passes, the death benefit is supplied to his preferred beneficiary or recipient but is only limited to the people listed.
3. Beneficiary – is the person, people, or institution(s) that accept the benefit the policyholder prepared when he disappears. As mentioned, there can be more than one beneficiary specified on the contract.
4. Premium – the amount of money contributed monthly or annually to keep a policy valid. If the policyholder discontinued paying for the premiums, the plan is disabled.
Customarily, life insurance is picked based on the necessities and intentions of the purchaser.
There are several categories of life insurance. It is vital to remember that death benefits from all types of life insurance are income tax-free in most cases, so make sure this is incorporated in the contract that you’ll sign. To help you choose the most reliable type to be insured, let us further discuss some of the classes of life insurance you can pick.
Term life insurance
Term life insurance is intended to guarantee financial protection for a specific period of time for as long as ten to twenty years. This type of life insurance is commonly less pricey than permanent life insurance. The premium installment cost will not increase or decrease for the coverage period you choose for this traditional term insurance. However, when that particular term ended, your preferred plan may suggest extended assurance, but usually, only at an extensively more expensive premium payment charge.
Excellent ADVANTAGE: Term life insurance gains can be used to compensate for the missed possible earnings during working eras. This profits can give a warranty catch for your grantees and can also assist in securing that the family’s monetary aims will still be fulfilled—objectives like keeping the business going, sending the kids to school, funding their school fees and daily needs, and paying off a lease if there is any.
DRAWBACK: It’s necessary to understand that term life insurance is unlike other types of insurance that can be paid monthly or periodically. Instead, it is settled in a one-time large amount of cash, also called lump sum.
Universal life insurance
Universal life insurance is permanent life insurance created to grant lifetime coverage. Consequently, due to its lifetime coverage, this type frequently imposed higher premium payments than the above mentioned. The good thing about this is, universal life insurance policies are adjustable and may permit policyholders to increase or reduce their installment fee or coverage amounts throughout their lifetime, though this may affect the figure of their death benefit. Literally, the higher premium you contribute, the more massive compensation your beneficiaries will receive.
Great ADVANTAGE: While the other types guaranteed death benefit coverage only, most plans of this type are devised on providing both death benefit and building cash-worth benefit. Universal life insurance is commonly used as a component of a resilient property planning tactics to defend assets better that is meant to be transferred to the chosen successors. Another major advantage of this insurance type is the long term income replacement, where the obligation continues beyond working years.
DRAWBACK: Expensive premiums.
Whole life insurance
Same as universal life insurance, this type is developed to grant lifetime coverage to many policyholders. Because of the lifetime coverage period, it has higher premium payments as well. But in this case, policy premium payments are customarily fixed. Different from term life insurance, whole life has a cash value, which functions as a savings component and may expand through tax-deferred over time.
Outstanding ADVANTAGE: Whole life can also be utilized as an estate planning tool to protect further the property you plan to pass on to your beneficiaries.
DRAWBACK: Premium payments are fixed and costly.
In general, life insurance is a defensive shield against unexpected loss. No one wishes to leave without preparation, but there’s nothing wrong with guaranteeing you have enough funds to make your loved ones live before you go.