What is Life Insurance?

Life insurance, like any other type of insurance policy, is a contract between you and the insurance company where they will pay the chosen beneficiary a pre-decided amount upon your death. This is important if you have a family to look after, as a life insurance policy will ensure they have the necessary finances to go on with their lives when you are not there to provide for them anymore.

The different types of policies

There are several different types of life insurance policies to choose from. They vary in costs and the period in which you are covered.

  1. Permanent life insurance: This policy will cover you for the rest of your life. The advantage of this policy is that it accumulates cash value over time, from which can be withdrawn.
  2. Whole life insurance: This policy also covers the remainder of your life, but the amount that will be paid out is a fixed amount as agreed upon on the date when the plan is purchased.
  3. Term life insurance: This policy is taken out for a specified term. This can be 5, 10, 20 or 30 years, after which the plan expires. This policy costs a lot less than the other plans, and it pays out only when you pass away during the specified term. This is ideal if you are older or have a terminal illness and your life expectancy is less than the term of the policy.

When the policy will pay out

We mentioned before that the policy pays out in the event where the insured person passes away. This is not always the case. Some insurance companies pay you fully or partially should you be diagnosed with a critical illness or get in an accident that causes disability which prevents you from going back to work. The insurance company will not pay out when your death is related to war, riots or suicide. Claims are also inspected for fraud before paying out.

How to choose a policy and get covered

The easiest way to acquire the information you need to make a decision is to speak to a professional who has been dealing with life cover for a while. This person will be able to inform you about things you may not have been aware of, and also help you calculate the amount of cover you will need. You may be wondering where to find someone like this. This is where the beauty of the internet comes in. There are several websites like LifeQuote that will ask you for some personal information. After completing this, you will receive a call from an independent advisor that will help you make the right decision. All this, of course, is done entirely for free.

You might wonder why someone would want to give you free advice. The answer is simple – these people will get a commission whenever they refer someone to an insurance company. For this reason, they can give their honest opinion about the policy they think will suit your needs best. It doesn’t matter which insurance company they refer you to; they will get paid. Don’t feel obligated to immediately buy insurance when they give you get a call; it is obligation-free advice. If you think you still need more time to do research, do it! You will be paying your life insurance premium for the rest of your life, so make the right decision from the start.

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