Life insurance is a common protection chosen in case an unexpected event happens to an individual. It will provide your beloved ones with the financial support needed like everyday bills, college education, and mortgage payments after you die. But, not many know how this kind of insurance policy works. Hence, some people still doubt including it in their financial plans. So, how does life insurance work? Dive down the page to help you find out how the insurance will benefit you.
Life Insurance: Basics
Simply put, a life insurance policy is a kind of insurance contract in which you agree to pay a premium to keep intact coverage when you buy it. Then, the loved ones you name as beneficiaries of the insurance will get the death benefits from the insurance company when you die.
Some life insurance types out there do not only offer death but also living benefits. Unlike death benefits, living benefits will make it possible for the persons named as your beneficiaries to receive financial support while you are still alive. These people will get the benefits if you, as the holder of the insurance, are terminally ill and need cash to pay medical bills.
What Is Covered?
The coverage included in the policy can cover a lot of expenses and it will highly depend on the life insurance you buy. Most of the time, the insurance is bought to allow your loved ones to fill in the gaps to pay bills of financial expenses after you die. On top of that, you can also buy a life insurance policy as an inheritance for your beloved ones.
Some insurance policies such as universal life insurance will make it possible for you to access its funds while you’re still alive. You can even borrow against the insurance policy to pay various expenses like college or home mortgage as long as you pay the premiums.
Costs of Life Insurance
When it comes to the costs of life insurance, this usually relies on several factors. These include the type of insurance policy that you buy and the insurance company that provides the policy. In some cases, the costs of the insurance are also based on your individual health and family history.
For instance, if you are a healthy adult and buy a 20-year term life policy, you might need to pay at least $30 per month. This policy will enable you to enjoy a half-million-dollar death benefit from the insurance company. Meanwhile, universal life insurance is considered more expensive if compared to term life insurance. Purchasing the whole life insurance requires you to pay $125 to $200 per month. The costs usually depend on various things such as your health profile, age, as well as the number of death benefits to receive.
When Do You Get Paid for the Benefits?
Life insurance benefits are usually given to the beneficiaries when the buyer of the insurance dies. Those who are named beneficiaries can claim life insurance simply by handing a certified copy of the death certificate to the insurance company. Most of the time, companies will grant the claim within 30 or 60 days after the death certificate is submitted.