Life is demanding in every aspect, and in most of the cases, there is no particular time when you will be free from needs or wants as you go along with your daily activities.
Apart from the fact that you have to establish some career goals, make monthly or annual budgets and try to stick to them, get your mortgage settled on time, have a financial plan and do all sorts of essential things that revolve around the upkeep of you and your family or descendants; you reach a point where you need a life insurance policy.
You might have heard of it and found out that it is as good as being financially prepared for the future needs. However, it is important that before you approach life insurance providers, you have a clear understanding of what it generally is.
What Is Life Insurance?
Simply put, it is a contractual agreement between two parties, one being an insurance provider and the other a client investing in some form of financial assurance just in case they are not there anymore to fend for their families (or have become incapacitated and unable to do so).
In the agreement, the policy provider is bound to provide payments in lump-sum to beneficiaries or heirs of the insured person at some point such as after his death. The insured in turn makes periodic payments in terms of premiums.
There are three major categories of life insurance. These are term, universal and whole insurance cover. Making good decision on which one to go for demands a little understanding.
a) Term Life Cover
From the name, you can tell that they cover protection offers that are for a defined period of time, after which policies may be revised to either appreciate in terms of the premium rate, or have different rates than the previous agreement.
This may be a more cost effective option when looking for a budget friendlier way to go as compared to permanent plans. The good thing about term life insurance is that it can provide financial relief to your beneficiaries in case income from your end is somehow lost or suspended.
It can cover in for financial gaps such as payment of education for your kids, settling your home loan and even sustaining your business operation. However, they are still paid in lump-sum, whatever the circumstances.
b) Universal Life Insurance Cover
This one is a permanent life insurance cover, which means that it provides lifetime coverage to the insured. However, the term universal suggests that you may decide to increase or decrease your premium contribution at any one time if you wish so.
Universal life insurance has more flexibility than most covers. It may be used as a wealth transfer plan to beneficiaries or as a financial relief strategy to beneficiaries.
Make sure to budget your monthly expenses for life insurance. We invite you to give this article a quick comment/share and then link over to our budgeting module for information about budgeting and budgeting worksheets.
c) Whole Life Insurance
The premium rates for whole life insurance cover are normally higher than those of the term life cover. Premiums are fixed; it has cash value, and may essentially come in handy as a savings plan. It can also act as an estate planning feature where accumulated wealth can be transferred to your heirs.
For individuals seeking protection against the loss of a primary bread winner, term insurance can be their best bet as it is highly affordable and has a defined time period. On the other hand, for individuals seeking a long term protection with a cash value, permanent insurance can be the best fit, as individuals can convert their benefits into cash, say upon retirement.
If you have none yet, go for a life insurance cover today from a reputable insurance provider and protect the future and financial security of your loved ones. Its the best decision you’ll ever make.
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