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Life Insurance : Everything You Need To Know About It (How Life Insurance Works)

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A lot of people have been asking questions about life insurance, how much they pay monthly, And so on, but today we will be talking about everything you need to know about life insurance, how it works, the benefits of life insurance, and many more.

What Is Life Insurance And How It Works

Life insurance is a contract signed between a life insurance company and a person, who gets to pay a regular premium payment in exchange. The insurance company will get to pay death benefits to the beneficiaries when the person dies. They can cover accidental death, natural deaths, also illness, or injuries while the person is still alive depending on the policy he/she buys.

Type Of Life Insurance

We have two types of life insurance which are:

  • Term life insurance
  • Permanent life insurance

Term Life Insurance: Term life insurance covers the insurer for a particular period of time picking at the purchase like 10, or 30 years. If the insurer dies during this period of time, the company will pay the beneficiaries the actual amount which was stated in the policy and if the insurer is still alive no money will be paid to anyone. They offer a high payout at a lower cost than permanent life insurance.

What Can Term Life Insurance Cover?

  • It can cover your child’s college fees if the insurer dies
  • Life insurance can cover your large debts like mortgage
  • Covers the insurer’s income if the person dies when still working and the insurer is the breadwinner of the family.

Permanent Life Insurance: Permanent life insurance policies cover the insurer till death time, there are also some other types of permanent life insurance which are variable life and universal life.

What Can Permanent Life Insurance Cover?

  • It can cover all the expenses of the funeral of the insurer if the family doesn’t have much.
  • It can be used to cover investments while the insurer is still alive.

What Can Life Insurance Cover?

The main aim of a life insurance company is to make provision of money to the beneficiaries when the insured dies, also it’s how the insurer died that will determine if the insurer pays for the death benefits. These are the type of death life insurance can cover:

  • Natural deaths: The type of death is when the insurer dies through a heart attack, old age, or disease. Make sure you check the company policy before purchasing.
  • Accidental Death: this death occurs when the insurer is involved in an accident that took his/her life this accident can be a car crash, poisoning, or drowning. This coverage does not cover natural death.
  • Illness/Injuries: Some company policies cover illness and injury to the insurer while he/she is still alive like cancer or chronic illness.
  • Suicide: Most life insurance covers suicide but this occurs only after the first 2 years of the policy.
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What Can Life Insurance Not Cover?

Life Insurance policies cannot cover something that is not in the policy such as:

  • Crimes activities: If an insurer dies while committing crimes like abusing drugs and alcohol the company will not pay the beneficiaries for the loss.
  • Falsification: It is important you are honest when applying for coverage, lying will make the insurance company not pay the beneficiaries.

Consideration Before Purchasing Life Insurance

The insurer needs to consider a lot before buying life insurance.

  • Make a research on the company reviews and the policy options
  • Check out how much death benefit you will need.
  • Know the reason why you are buying life insurance.

Factors That Affect Your Premium Rate

  • Age is the most necessary factor to determine your premium rate.
  • Gender (Females tend to get a lower premium rate
  • Smokers ( smokers tend to have a higher premium rate)
  • Health (chronic health issues can increase your premium rate.
  • Medical history of family
  • Lifestyle.

Benefits Of Life Insurance

  1.  Life insurance payouts are tax-free.
  2. Beneficiaries will not have to worry about living expenses
  3. Funeral expenses can be covered based on the type of policy the insurer signed for.
  4. Permanent life insurance policies can also offer cash value in addition to the insurer.

What Does Not Affect Your Life Insurance Premium Rate

  • Your race, age, ethnicity, and sexual orientation
  • Marital status (single or married can apply for life insurance)
  • The number of your beneficiaries

Who Needs Life Insurance

  • Parents with a small number of children
  • Guardians with special children
  • People (Adults) who have property together
  • Young adults or children
  • Families who cannot provide for funeral expenses
  • Pensioners who are married
  • Rich families who own a lot of properties
  • Stay-at-home couples.

Conclusion

In conclusion, Life insurance is qualified for everyone both male and female, it is important for you to know all the terms and policies of the company before applying for the insurance. Make research about the company and its company policy option before agreeing to their policy.

Thank you for reading, you can drop your comment in the comment section and also drop your suggestion or if you want to make an inquiry I will be attending to you all.

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