While you may understand the importance of life insurance, how much do you actually know about it?
Are you familiar with how it works?
Do you know about the different types?
And most importantly, are you aware of what factors can affect the price of your plan?
Let’s take a moment to discuss all of these factors and more in this life insurance 101.
So How Does Life Insurance Actually Work?
Simply put, life insurance is an agreement between you and your insurance company.
In exchange for the timely payment of your premiums, the company agrees to provide financial benefits to whomever you name as your beneficiary.
After you pass away, your beneficiary will file a claim and present a death certificate to show proof of your death.
In some cases, an agent will help them to complete all of the paperwork.
If the beneficiary is a minor, then their guardian will file for them.
Types of Life Insurance
There are two types: permanent and term.
While term, meaning temporary, is set up to only cover 5 to 30 day periods, permanent will cover the rest of your life–usually to around age 100.
So what’s the biggest difference between the two? Well, term insurance has no value at the very end of the term.
However, permanent insurance builds cash to the point where you can actually borrow against it.
Factors That Affect The Price of Your Plan
There are several things that will help to determine how high your premium is.
For instance, most companies take gender into account, because females tend to have longer life expectancies.
Many consider the state of your health; certain medical conditions could cause your premiums to be higher.
Companies also take your smoking habits into account when determining how much your premium will be.
Choosing the Plan that’s Right for You
There are several things that you can do in order to make the buying process easier.
First, consider your specific needs.
Calculate your current and future living expenses and compare them to your current income.
Take the time to shop around so that you can compare the different rates and policies of companies.
Make sure that you choose a company that has a high rating when it comes to finances.
Finally, you should make sure to thoroughly read your policy.
This is especially the case when it comes to the fine print.
Most states laws will allow you a certain number of days to change the things that you don’t like or to cancel your policy and then receive a full refund.
As you can see, there is a lot to consider when it comes to life insurance.
The key is to do thorough research.
With time and attention to detail, you should be able to find the policy that is perfect for you.