How Does Life Insurance Work’
Life insurance is simply that’an insurance policy on your life. You purchase a life insurance policy from a qualified provider, paying them a premium. The premium is either paid monthly or in a lump sum (usually annually or every six months). The insurance company then agrees to pay an agreed upon amount of money after the insured person dies. The amount of money paid from a life insurance policy goes to the policy’s designated beneficiaries in a lump sum payment. If no beneficiaries are designated, then the payment is made to the estate of the deceased.
There are two kinds of life insurance policies: Term insurance policies, also called protection policies. Term insurance is temporary, for a set term of years, providing your family with coverage for a specific number of years for a set premium (although premiums typically go up as you get older).
Term life insurance does not accumulate cash value. When you buy term life, you are just buying your family or loved ones or business partners protection in the event of your death.
Investment policies: these are commonly called permanent life insurance. The objective with permanent life insurance policies is to grow capital with the payment of either regular or single premiums. Permanent life insurance is also known as whole life insurance. This type of life insurance provides life time coverage as long as the policy premiums are paid. The premiums are fixed, and unlike term insurance, there is guaranteed cash value. The insured can access this cash for emergencies, retirement or other expenses.
The kind of life insurance you buy generally depends on the goals you want your coverage to accomplish. Most people fin that term life suits their needs, making sure their bills are paid and their heirs receive some assistance after their deaths. Others want a reliable source of cash accumulating as they pay their premiums. Speak with a qualified agent to decide which kind of insurance is best for you.
Life insurance policies usually cover death, although they may also cover dismemberment or serious illness, and give extra benefits in the event of accidental death, depending on the policy purchases. Proof of death or injury is always required before payment, regardless of the type of coverage. Remember, to get your coverage, you will have to get a physical examination from a company-approved doctor to give the company an accurate picture of your medical history. And even after you pass your physical, the coverage does not start before premiums are paid. Once premiums are paid, the policy is activated.
A qualified life insurance agent can answer all your questions. He or she can help you customize coverage to meet the needs of your family.
Tom Martens is the content syndication coordinator at Lifeinsurance-Southafrica.co.za South Arica?s leading Life Insurance and Life Cover portal.
