Life insurance is designed to provide a death benefit to your beneficiaries in the event of your death. It is important to find a life insurance company with good financial strength ratings and a history of stability.
It’s also a good idea to look for companies that offer tools like calculators and estimators. These can help you determine how much coverage you need. Read on to find out more.
Benefits
Make sure you are covered and your family is taken care of with life insurance. A financial professional should be able to find a policy that fits your budget.
The death benefit is a lump sum that can help your family pay for expenses like your mortgage or children’s college tuition. It can also be used to pay for funeral costs. The money is paid tax-free to your beneficiaries. It can also be a way to supplement other assets in your estate.
You can choose a term or whole life policy. You can also add a rider to the policy. Some riders allow you to access your death benefit while alive for specific reasons, such as a long-term care event. Other riders can increase your death benefit, change premiums, or cancel a policy.
Premiums
The premiums associated with life insurance are a major source of revenue for life insurance companies. They are used to pay death benefits and other policy expenses. In addition, they are invested to generate returns. These investments help life insurance companies keep their prices competitive in the market and provide a good return for investors.
Life insurance companies often charge more for men than women, as they believe that men have a greater risk of dying earlier than women. They also take into account lifestyle habits and other health issues, such as smoking and dangerous hobbies.
Almost all life insurance policies have a two-year contestable period, during which the company can review your application and request medical records. If they discover that you gave false information or didn’t disclose a condition, they may deny your death benefit. If you miss a premium payment, the company will typically charge interest. However, most insurers offer a grace period to give you a chance to pay the amount owed without penalty.
Coverage options
When determining how much life insurance you need, consider your financial responsibilities and long-term goals. You should also decide whether you need protection for a specific period, such as the length of your mortgage or debts, or for your entire lifetime (which is provided by whole life, universal life, and variable universal life policies).
You should also choose the amount of coverage that your nominee or beneficiary will receive in case of your death. This lump sum amount is called the Maturity Benefit or Death Benefit.
Term life insurance offers temporary protection for a set period, typically 10, 20, or 30 years. It is more affordable than permanent coverage. However, it does not build up cash value and may become expensive as you age.
Claims
When the death of a policyholder occurs, the beneficiary must file a claim with the life insurance company. The process varies from one insurer to another. But beneficiaries can generally expect to be required to submit a copy of the policy, a certified death certificate, and other forms and documentation.
Once the life insurance company has the proper paperwork, it will typically pay the beneficiaries in a couple of ways. A lump sum payout gives the beneficiary a large chunk of money all at once, which can be useful for paying off debt or investing it.
It’s relatively rare for a life insurance claim to be denied, but that could happen in cases where the deceased lied on their application or let the policy lapse. For that reason, it’s important for policyholders to keep their premium payments current. This can also help protect against accidental lapses. A financial advisor can help you understand your options and assist with filing a claim. Next blog post.