FAQs About Life Insurance, ANSWERED!

Insurance is made to protect various things like vehicles, properties, prized possessions, health, business and even your life! Life insurance is one of the most popular coverages most adults get, specifically breadwinners or people who have dependents.

Life insurance is made for the dependents, not for the policyholder themselves. This coverage takes effect once the policyholder passes, and depending on the life insurance you have, your dependent’s coverage may vary.

Life insurance is pretty tedious and can be confusing to many people. That’s why down below is a compilation of life insurance FAQs – ANSWERED!

What is life insurance?

Life insurance is a contract between a policyholder and a provider in which the policyholder agrees to pay a certain amount or ‘premium’ annually in exchange for coverage in the event that the policyholder passes away or after a certain period of time.

In a nutshell, your dependents may maintain their standard of living after your death due to life insurance, which replaces your income.

What is a ‘dependent’ in life insurance?

When scouting for life insurance, you’re bound to come across the term ‘dependent’ and since life insurance is basically made for dependents, this is a term you need to fully understand. Dependents are essentially those people who qualify for coverage under your life insurance policy.

And dependents don’t necessarily have to be children, they can also be stay-at-home spouses, your parents, company employees, your partner who co-pays your property and more. So even if you’re the policyholder, they’re the ones you get the coverage for.

What are the factors that affect life insurance premiums?

Life insurance premiums and coverage are different for everybody, that’s because not everyone shares the same level of factors such as:

• Age – Life expectancy is the most important component since it poses the greatest risk to insurance companies. So the older you are, the more your premiums increase.

• Overall health – The majority of policies mandate that medical exams include testing for illnesses and other pertinent medical indicators that may indicate risk. Therefore, your premium may rise the more serious or numerous your medical condition is.

• Gender – It has been proven that men live shorter lives than women, making it a component insurance providers consider.

• Driving record – Since vehicular accidents are one of the most frequent causes of death, this is something insurance providers consider a factor. So the more violations you have, the higher your premium may be.

• Vices – Another factor that can put your life at risk is vices such as smoking, drinking, doing drugs and so on. So if you do either one, you’re more likely to have a higher premium.

• Family’s medical record – Family medical histories can also be used as a risk indicator. This is because you have a greater chance of receiving it which means great life risk.

• Lifestyle – Last but not least is how you live your life on a daily basis. May it be the nature of your work, where you live, what your hobbies are and so on. If the insurance provider deems it to be life-threatening, your premium increases.

Your insurance company will require you to provide certain information as you apply and listed above are one of the common ones, other than your name, address, contact information and so on.

What are the main types of life insurance?

There are two main types of life insurance, all of which hold their own set of factors, regulations, purposes, premiums, procedures and longevity. The two main types are Term life insurance and Permanent life insurance. To fully grasp how these two types work, down below is a rundown:

Term life insurance

By its name ‘term’ means it’s insurance coverage that expires at a given time. This insurance policy is usually sold in lengths such as one-year coverage, five, ten, fifteen, twenty, twenty-five, thirty and so on. This is also the cheapest one on the list.

Permanent life insurance

These plans are permanent and typically have a cash value component that you may use to make withdrawals or take out loans while you’re still living. You can even pay for other expenses like buying a car, getting your house refurnished and so on.

What are the top benefits of life insurance?

There are various advantages when obtaining life insurance but there are 4 specific ones that stand out. So if you’re still thinking about getting life coverage, below is a list that will surely get you convinced!

• Pay outs are tax-free – Once your coverage takes effect you can guarantee your dependent to get the said compensation down to the last cent.

• Most life insurances cover final expenses – Once you pass, not only does your dependent get the compensation but also covers your funeral expenses.

• Most life insurance provides coverage for terminal and chronically ill individuals – Even if you’re guaranteed to pass sooner than most, various providers will still allow you to get life insurance.

• Your retirement savings can be supplemented by policies – If you get universal, whole or variable insurance, your policy can grow in cash value. And while you’re alive, you can use the added cash value for other expenses.

How do I get life insurance?

If you’re new to insurance, it’s best to get an insurance broker to help you out. These are specialized professionals that know a whole lot about insurance and everything it entails. And insurance brokers work for you, not insurance providers so their loyalty lies with you.

Insurance brokers will be able to help you scout for providers and well as plans based on your needs. They can also help you fully understand the plans you’re getting, help you file claims and also provide you with quality advice.

Working with an insurance broker will relieve you of all the tedious processes, insurance terms, regulations and so on. So greatly consider working with one!

Take away

Now you know all the FAQs of life insurance, use this new-found knowledge when getting life insurance coverage and for sure you’ll be pleased with the results! You now understand what life insurance is, how it works, the basic forms of life insurance, and how to get it, so you’re all good to go!