Life insurance is nothing but the contract between the policyholder and insurer. While paying the premium or payments, the insurer provides payer the death benefits after payer’s death. However, the typical benefits of such policy provide expenses related to funeral and other bills. Though, it is also possible to take the certain benefit, while the payer is alive. It is to note that the type of benefit depends on the type of policy and causes (illness) that let the insurance payment be taken out.
When to consider life insurance policy:
The aim of life insurance policy is to give the policyholder an assurance of being the helping hand, which is applicable before and after the death of policyholder. However, choosing the right type of life insurance is a bit confusing, and it also takes an important considerations and guidelines before choosing such. Here is a list of two considerations given, before choosing life insurance plan-
- When the applicant needs a life insurance plan for a specific period (Term Life Insurance). For example, child’s education purpose; the applicant may apply for a 20-year term life insurance that could surely pay for their college education. Even, one can pay the debt after a specific period by a term wise insurance policy. In term life insurance, the policyholder receives no return on the money paid for the insurance. However, if the policyholder dies before the term is over, the family people would receive the full amount of the policy.
- When the applicant needs Whole Life Insurance with a limited budget. In this case, the amount of insurance would be paid only when the applicant dies during the long term policy. If the applicant is still alive and at the end of the term, the coverage would stop and no equity will take place by cash savings. Even, the applicant may take out the money at any point of time during the lifetime. Though, after the completion of the insurance policy, the policyholder would get a lower rate of return, which is less than the returns on mutual fund and business investment.
It is to note that the premiums for long-term insurance don’t cost much at the beginning, but upon renewal, the cost increases. Some insurance policies are renewed at the end of the policy, but the premium one keeps increasing. Even, some policies require medical examination at renewal, to qualify at lowest rates.
However, if the applicant thinks that financial needs may change later, then one may look into the “convertible” term policies. In this policy, one may easily convert into permanent insurance and that would take place in exchange for higher premiums, without the medical examination. Due to such flexibility, such insurance policy is called Universal life insurance.
How to consider the best life insurance plan?
Finding the best life insurance policy doesn’t mean a cheap life insurance policy, rather it provides the required funds at the later phase of life. For example, if the applicant is now of 50 years old and needs insurance of shorter time period, whereas if that applicant of age 50 applies for Universal Life plan, then it would be possible to recover the sudden-death benefits and even helps to build cash value when a financial problem arises, while living.
Apart from universal and short term life insurance policy, one could take lifetime coverage of tax-deferred savings. For example, if the applicant wants to transfer his/her wealth to the payee, then Whole Life Insurance is applicable in this case.
When the applicant gets ready to take suitable life insurance quotes, the applicant can easily buy life insurance online or through an agent. Even, some life insurance companies provide online life insurance calculator to understand how much premium an applicant of life insurance policy needs to pay.