Life Insurance Explained

What is life insurance?

Most people at some point in their life need life insurance. Life insurance policies are contracts between you and the insurance company, where the insurance company agrees to pay a sum to the beneficiary of the insurance policy when the life insured dies. In return the life insurance company will charge a monthly premium cost for the policy holder to pay. After the policy holder dies, the beneficiary, which the life policy holder predetermined will receive the amount. There can be more than one beneficiary and they will usually be a policyholder’s dependants. Life insurance policies provide the reassurance to the life insurance policy holder that their family will be provided for in the event of an early or unexpected death.

People generally will buy a life policy to support their family with the income that would be lost should they die prematurely. Whilst the life insurance policyholder is alive and working their income is used for this purpose, upon death, this income ceases. This is where their life insurance policies will payout to provide financial support for the dependants left behind after the insurance policy holders death.

Another common type of life insurance policy is to provide a lump sum for a child in the event of the worst happening to the life insurance policy holder, this may be to ensure that the child can still afford to attend university or have a deposit for their first home for in the future.

A life insurance policy can be used to pay for funeral expenses and/or to clear any outstanding debts the life policy holder may have left behind, ensuring that any family are not left with the debt. Upon death, funds can be released quickly for these purposes.

Life insurance plays a very important role, without life insurance, upon death of the insured, their assets may have to be sold off by the policy holders family to pay off any outstanding debts. Such debts may include a life insurance policyholder’s credit card, loan or/and mortgage. This may be done in haste do try to pay this off as soon as possible, causing the possessions not to gain the true value.  This can be very distressing for the family who have already lost their loved one and the cost of raised from these possessions may not even cover the amount of outstanding debts. Once any debts and funeral expenses have been paid off, without a life insurance policy in place, it is unlikely that there would be any assets left for the deceased’s children and/or spouse.  Illiquid assets (property and assets that cannot be easily converted into cash) may have to be sold off. This may include the family home. Having an life insurance policy in place can prevent all this and will allow the insurance policyholders family who have already lost their loved one to avoid this further distress of loosing their possessions.

How to look for the best life insurance policy for you.

There are many types of life insurance cover available. Some life insurance policies may cover you for a whole life time or some may cover you for a set period of time. A life insurance policy may only provide basic life cover or added features can be selected, such as a savings facility, critical illness cover or waiver of premium. A policy may insure a single person or joint life.

 Insurance companies who offer life insurance will assess an application by asking a number of questions which they will need to know about, these may mainly be health related.The questions will also include the age and occupation of an applicant, as well as whether they smoke or exercise  Your answers will determine the life insurance premium offered by the insurance company. It wise to be truthful when answering these questions or your beneficiaries of the life insurance policy could come across problems in the event of the death of the life insurance policy holder.

You can apply for life insurance online. It is recommended that you speak to someone and get help to make sure you decide on the right level of cover for your own needs. Once the level of cover for you life insurance policy needs is decided upon, it is a good idea to contact at least six or seven providers. Life insurance policy features and costs can then be compared to ensure a consumer secures the best value deal to suit their own personal needs.