A novice who plans to take up a life assurance policy often does not do so because he or she gets confused about the various aspects of these plans. Below you will find some pointers that will help you understand such plans before applying for them.
The Importance of a Policy
The first thing that a person will consider in purchasing a policy is its importance. Why is life insurance important? In order to answer this question, a person must first ask this question to himself, “If I die unexpectedly, will somebody be affected financially?” If the answer is “Yes”, then that means that this person needs a policy.
Just like any legal contract, a life insurance contract is signed by the insurance company that sells the policy and the applicant who buys the policy and becomes the policyholder. The insurance company must state that it is willing to pay the specified coverage amount when the holder dies. The policyholder meanwhile must take the responsibility of making regular payments towards the premium cost of the policy. Both parties must honor the contract. The insurance company has the right to refuse payment of death benefits or even cancel the policy midway if the holder defaults on payment or does not pay them on the due date.
A life insurance policy provides peace of mind to a person who has families dependent on them. the holder of a policy can assign the death benefit to anyone of their choosing – parents, children, spouse, pets or even a favorite charity. The beneficiaries must be clearly listed in the policy and they will receive the death benefit upon the demise of the policyholder.
Life Insurnace Policy Cost: The next consideration when choosing a policy is its cost. The cost will be the premium amount that has to be paid at regular intervals. This premium amount will depend on the type of policy the holder chooses, the amount of coverage he wants and the length of the term he chooses.
An important consideration when a person decides to invest in life insurance is the coverage amount of the policy. This is the money that the holder is insured for and it is what his beneficiaries will receive upon his demise. The cost of insurance is directly proportionate to the amount of coverage – higher coverage amount means higher insurance premiums. The holder must choose the coverage amount based on his family’s needs. A middle income family will require a smaller coverage amount to take care of their future financial needs. The common method of calculating coverage amount is to multiply current annual salary by 10 and this figure will be adequate to take care of the family’s needs in the future.
The kind of policy chosen by the applicant also determines premium amounts. If he chooses a term life insurance policy, his life will be insured for specific time periods ranging from 1-30 years. When the holder requests term life insurance quotes, he will find that the insurance rate will vary with the term since total cost will be divided over the entire term. Hence, a long term policy will require the holder to make lower premium payments on the required dates.
The cost of insurance premiums is also determined by the type of policy. If a person chooses a universal life insurance, this includes both death benefit portion and an investment portion that is the savings component. Hence the cost is higher as he has to pay for two components. Term life plans on the other hand only have the death benefit component and therefore it is a cheaper plan.
A no medical life insurance is another type of policy that allows a person to be covered by insurance even without having to undergo a comprehensive medical examination. This type of policy will base its premium rates or insurance quotes on the age of the policy holder and the medical information that this person is willing to disclose to the underwriters.
As advised by David Livingston, in order to make the best decision possible, you need to fully equip yourself with all the information before taking the non recourse action. Go here today for more information on your desired policies or visit his site for other specific information such as term life insurance quotes today.
