INFORMATIVE

Life insurance

Life insurance is a contract between an individual (the policyholder) and an insurance company. In exchange for regular premium payments, the insurance company promises to provide a designated sum of money (the death benefit) to the policyholder's beneficiaries upon the policyholder's death. The beneficiaries can be family members, loved ones, or anyone else specified by the policyholder.
LIFE INSURANCE
LIFE INSURANCE

Here are some key points about life insurance

Types of Life Insurance: There are several types of life insurance, but the two main categories are term life insurance and permanent life insurance.
    • Term Life Insurance: Provides coverage for a specific term, typically 10, 20, or 30 years. If the policyholder dies during the term, the death benefit is paid out to the beneficiaries. Term life insurance does not accumulate cash value and is generally more affordable than permanent life insurance.
    • Permanent Life Insurance: Offers lifelong coverage and includes policies such as whole life, universal life, and variable life insurance. Permanent policies can build cash value over time, which can be withdrawn or borrowed against during the policyholder's lifetime.
Purpose
: Life insurance is often purchased to provide financial protection to the policyholder's loved ones in case of their untimely death. The death benefit can help cover funeral expenses, pay off debts (e.g., mortgage, loans), replace lost income, and ensure the financial well-being of beneficiaries.
Premiums
Policyholders pay regular premiums to keep the life insurance policy active. The premium amount depends on factors such as the policyholder's age, health, coverage amount, and type of policy.
Underwriting
During the application process, the insurance company assesses the applicant's risk profile through underwriting. This involves evaluating the individual's health history, lifestyle habits, and other relevant factors to determine the insurability and premium rates.
Beneficiaries
The policyholder designates one or more beneficiaries who will receive the death benefit when the insured passes away. Beneficiaries can be changed over time if needed.
Tax Implications
In most cases, life insurance death benefits are paid out to beneficiaries tax-free. Additionally, the cash value growth within permanent life insurance policies is tax-deferred.
Riders and Options
Insurance companies may offer optional riders or additional features that policyholders can add to their life insurance policies for enhanced coverage. Examples include critical illness riders, disability income riders, and accelerated death benefit riders.
It's essential to consider your financial situation and goals before purchasing life insurance. Consulting with a financial advisor or insurance professional can help you determine the most suitable type and amount of coverage for your needs.