When it comes to the essential personal finance pillars, life insurance is definitely one of them. As the name suggest, this insurance is available to insure your life. You are not the one receiving the financial benefit of this insurance. Instead, your beneficiary will be the one receiving the benefit so it is like you are protecting the ones you care the most when you are no longer around to afford their lives. So, if you find any of these signs, it is clear that you absolutely need life insurance.
Someone Relies On You Financially
If you are the head of the family and the one providing the financial needs, then you definitely should have life insurance. This insurance is even like a virtual obligatory for parent of dependent children or a spouse. Yet for child of dependent parents or business partner, this insurance is also necessary. By having this insurance, you already have some kind of financial protection for your loved ones.
There is one thing that insurance holder should know. This insurance is not simply someone’s life monetary value. Instead, it actually is an item that helps compensate for any financial consequences that are inevitable following the loss of life. This is why the insurance can help those who are left behind by covering the any outstanding mortgage and debts, paying the final expenses cost, lost income and planned educational expenses. Therefore, this insurance is considered vital for stay-at-home spouse or single-income household.
Life Insurance is Contract
One thing for sure, life insurance is considered a contract or a policy. In other words, it is a contract between the insurance holder and the insurance company. The holder is the one paying the premium while insurance company is the one that pools the policy holder’s premiums and pays out claims which is known as death benefit following the death of the policy holder. The insurance company takes profit of the difference between claims paid out and premiums taken in.
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4 Primary Players in Life Insurance Policy
As a policy holder, you need to know the primary players or roles that are always there in life insurance policy. The players include the owner, the insurer, the beneficiary and the insured. The owner refers to the one paying for premium payments. The insurer refers to the insurance company that is responsible to pay out the claims. The beneficiary is the one that will receive the death benefit. And the insured is the one whose life based on the policy.
Life Insurance Is Not Investment
Do not ever assume life insurance as investment because it is rather a risk management. Although it is true that some types of life insurance can work like investment but the amount of return is actually way smaller than common investment. Therefore, do not consider this insurance as investment in case you want to invest. Think of it as what it really is, an insurance and protection for your loved ones in the event of your death.
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