Life insurance has the goal of providing a measure of financial security for your family in case of your death. Before you buy a life insurance policy, take into consideration your financial situation and the standard of living you want your survivors or dependents to maintain. Take into account who will be responsible for your medical bills and funeral costs. Also, check if your family may need to relocate. Assess if they will have enough funds for ongoing and future expenses like college, mortgage payments and daycare. It will be prudent if you re-evaluate your life insurance policies annually or whenever you experience significant changes in your life like the purchase of the main items of a business or a house, adoption or birth of a child, marriage, and divorce.
Check if you have enough funds to pay for ongoing and future expenses like college, daycare, and mortgage payments.
The Way Life Insurance Works
The contract between a person with an insurable interest and a life insurance company is called life insurance. The financial risk of premature death to the insurer will undergo transfer in exchange for a specific amount of premium. The life insurance contract has three main components: a bonus payment, cash value account for permanent life insurance holders and the death benefit.
Benefit of Death
The death benefit is the amount of cash that the insured's beneficiaries may receive from the insurer when the insured passes away. The insured will determine the amount of the death benefit, and the insurer will check if the insured is qualified for the coverage based on the underwriting required and if there is an insurable interest.
Through the use of actuarially based statistics, the insurer may determine the amount of the premium needed to cover the cost of mortality. It includes factors like lifestyle, family and personal medical history, and the insured's age as the primary determinants of risk. As long as the insured will pay the agreed premium, the insurer will remain obligated to pay for the death benefit. The bonus amount includes the insurance cost for term policies. The premium price includes the insurance cost plus the deposited cash value account for permanent policies.
The cash value component is part of the permanent life insurance that serves two purposes. The savings account allows the insured to gather capital that may eventually become a living benefit. The capital may accumulate on a tax-deferred basis. The insured may use this for any purpose while he or she is still alive. The insurer may also use this to mitigate the risks. With the accumulation of the cash value, the risk of the entire death benefits decreases of the insurer. It is how it can charge a level premium at a fixed amount.
At the Roper Insurance Services we take pride in making sure our clients are well protected at prices they can afford. To learn more about how we can help you please contact our agency at 1-877-767-3711 or Click Here to request a free quote.