Its Types and Benefit for Your Life

Life Insurance: Its Types and Benefit for Your Life


What is ‘LifeInsurance?’ Do you need it? You don’t need it enough, but if your children, partner or other relatives depend on your income to cover the mortgage or other living expenses, then you should say Yes. It surely provides you and your family a financial protection in surviving dependents after the death of insured.




How Life Insurance Works

There are three main components of this kind of insurance policy. They are as follows:

1.      Death Benefit

Death benefit is the amount of money that the insurance company guarantees to beneficiaries identified in the policy upon the death of the insured. The insured will choose their desired death benefit amount based on estimated future needs of surviving heirs.
The insurance company will determine whether there is an insurable interest and if the insured qualifies for the coverage based on the company’s underwriting requirements.

2.      Cash Value

Cash value is a component which serves two purposes. The first, cash value is a savings account which can be used by the policyholder. Some policies may have restrictions on withdrawals depending on the use of the money withdrawn. The second, cash value is also to offset the rising cost or to provide insurance as the insured ages.

3.      Premium Payment

Premium payment is set using actuarially based statistics. The insurer will determine the cost of insurance or the amount required to cover mortality costs, administrative fees and other policy maintenance fees. For permanent or universal policies, the premium amount consists of the COI and a cash value amount.

Types of Life Insurance and Its Benefit

Your dependents money as payments if you die can be paid by life insurance. It is designed to provide you with the reassurance that your dependents will be looked after if you are no longer there to provide. The bills paid out depends on the covered level you buy. You need consider the insurance types. You can think types below:

1.      Term this Insurance

This type is useful to give protection to insurer for a fixed period of time. This insurance usually offers a contract for 5, 10 or 20 years cheaply and permanently premium payment. You’re recommended to choose this insurance type if you prioritize your family future, especially for your children’s education.
This insurance type is suitable for you whose are needs to pay high insurance expenses. In addition, it’s for people whose are limited financial capability. This kind of policies only pay out if you are died during the policy. There’s no lump sum payable at the end of the policy term.
If you chose this type, you will get benefits as follows:
l  You will get an authorship in determining the amounts of premium agree with your capability.
l  You can acquire insurance money to the billions. It means that if you passed away when the contract’s active, so your family obtains a lot of insurance money enough.
Meanwhile, this type also has deficiency for you as follows:
l  You can be loss for paid money premium or completely used up of premium when the contract’s end. It’s happened when you don’t get health problems or death until the end of contract.

2.      A Whole of this Insurance

This insurance type is used for people who want to get assurance as well as investment. This type is different than before. It’s also used as investment media and protection in one product. This insurance provides whole life protection even though usually the insurance company confines the protection benefit until 100 years.
This type is recommended for people whose aren’t having assurances and want more benefit than death compensation. It’s also for you who are interested with long term investment. So if you want life insurance and investment for emergency needs like paying hospital expenses, you can consider to buy this type.
The benefits for you in having this insurance are as follows:
l  You have possibility to get a cash value from paid premium.
l  If you as insurer cannot pay premium installment periodically, you can use cash value from the next paid premium.
l  Insurance premium that was paid will not be expired if it there’s no claim.
l  When the contract is end, the insurance money will be given all.
This type also have deficiencies like as follows:
l  The premium’s higher than premium of periodic insurance even can be doubled. It’s caused the amount of life expectation is about 65 years old for woman and 70 years old for man.
l  The paid cash value of premium total is not too high because the interest for this insurance is only 4% per year and this amount is not in tax yet.

Beside of two main insurance types above, there are other insurance types which you can choose. The following are other insurance types that can you take:

1.      Endowment Insurance

This type has two benefits that are periodic insurance and investment. That means that you can acquire cash value from insurance premium that has been paid. This insurance is recommended for people who want to ensure the readiness of education fund for children, fund of unpredictably future needs and higher fund of pensioner.
The benefits that can you take from this insurance type are as follows:
l  You can claim insurance policy before the end of contract like for children education fund. But this drawing can only be took once in years according to the contract.
l  If you as insurer are still alive at the end of contract, you will get all of insurance money.
Meanwhile, the deficiencies of this type are as follows:
l  Because of this insurance type has two benefits like merging periodical insurance’s benefits with whole of this insurance, so the premium is high enough. It can attain to millions per month.


Other post : Mandatory Insurance In Terms You Should Know

2.      Link Unit Insurance

In this insurance type, there are combination between insurance benefits with investment. In addition, it’s very often offered by insurance agency. If you interest to invest but don’t understand about investment, and want to ensure your life gets insurance from death, you can choose this type.
Thus, the benefit of this insurance type is as follow:
l  Here, you don’t only get protection assurances, but also investment income with high interest enough in every year.
Meanwhile, the followings are deficiencies of Link Unit Insurance:
l  A feedback from the investment is less significant if it’s compared with pure investment. If you look for high profit from investment, you should not rely on this Link Unit Insurance.
l  The acquired insurance money is low, especially if the investment is failed or only in low profit.

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