What is a life insurance policy all about, how does life insurance work?
Life insurance provides a death benefit in the event the person insured passes on. You may choose to have the death benefit paid to your beneficiary in one lump sum or in the form of an income.
You pay a premium each month, each quarter, semi annually or annually for this life insurance coverage.
Why would one buy a life insurance policy? Life insurance can be used to provide funds for a spouse or dependent children in case the breadwinner dies.
Life insurance pays off mortgages, provides food, provides clothing for dependents. It is wise to buy life insurance just in case. This guarantees that the family can go on living in the manner they are accustomed to living.
Business people may use life insurance to fund buy sell agreements in case a partner or shareholder dies. Life insurance is used to protect a business in case a key employee should die. Life insurance can provide funds for a friend or family member to restart a sole proprietorship upon the death of the owner. The sole proprietorship dies with the owner or proprietor.
There are 2 types of life insurance, term life insurance and permanent life insurance. Term life insurance provides coverage for specific periods of time. You can buy term policies for 5 years, 10 years, 15 years 20 years, 25 years or 30 years. Some term policies terminate at specific ages. You can buy a term life insurance policy to age 65 or age 80 for example.
There are riders that can be added to your life insurance policy. You may choose to add the waiver of premium rider. This rider provides that premiums will be waived if the insured should become disabled and is unable to work. Disability must last for at least 6 months. Whenever the insured returns to work s/he picks up premium payment again.
You may also add the accidental death benefit rider which provides that if the insured should die in an accident the amount paid will be twice the face amount of the the basic life insurance policy.