A life insurance policy is a contract between an insurance company and the policyholder. In essence, the contract mandates that in exchange for an agreed-upon insurance premium, the insurance company makes a payout to the insured’s beneficiaries when they die.
The benefit payout can be paid as a lump sum or in increments, depending on what was specified by the policyholder. The payout amount is determined by the premiums made by the policyholder over the lifetime of the insurance policy.
The primary reason people get life insurance is to ensure their dependents get financial support to make ends meet in the event of their death.
Types of Life Insurance
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Events like marriage, childbirth, and significant purchases may impact the long-term needs of your beneficiaries. So it’s important to continuously reassess your life insurance coverage to ensure it adequately provides for the needs of your beneficiaries.
Who Needs A Life Insurance Policy?
The essence of taking a life insurance policy is to provide for your dependents when you pass away. So life insurance is only a good investment if you do have dependents. Assuming you don’t have dependents, then the policy is not worth the money.
If you have dependents, these questions will help you know whether you need to invest in life insurance, and if so, how much payout you should aim for.
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How long would it take for your dependents to be self-sufficient, and how much do they need to carter for themselves?
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Do you have any assets that your dependents may inherit to help them carter for themselves?
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Do you have any friend(s) or relative(s) who you can count on to take care of your dependents when you are no longer around?
In answering these questions, you need to establish how much your dependents need to be taken care of. This would help you decide on how much you should contribute to your life insurance policy.
How to Buy a Life Insurance Policy
It’s essential to first learn about the various options available to you before diving into buying a life insurance policy. Also, understand the advantage and cons of each type of life insurance and whether they offer permanent or term life coverage.
Once you establish the type of coverage you need and the kind of insurance to choose, you can start requesting quotes from various insurance companies that meet your specifications.
When you compare prices, you’ll be able to identify and choose the most attractive offer on the table or use specific offers as leverage to get a better deal from other providers. Finally, once you’ve identified the ideal insurance provider for you, start the application process.
This typically involves submitting necessary personal documents, completing application forms, and undergoing a medical examination.
Not all insurance companies require a medical exam, so you can ask the insurer upfront about their application process if you don’t want to undergo one.
Once you are approved, you can then structure your coverage how you want. You’ll have to set a payout amount and choose riders before signing the document. After that, you start paying your premiums when the time comes.
