Understanding The Life Insurance Cover
Post date: March 29th, 2010 |
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The basis of deciding the appropriate life cover is not only the cost of the insurance policy. One should also assess if a cheaper policy can provide you with the right amount and type of protection coverage. Thus, the proper way of evaluating the insurance policy being offered by the insurance agent or the insurance company is to determine if the life cover can provide the protection you want to give your loved ones.
Most of us tend to base our decision on the cost of the life cover policy. We should always remember the reasons why we are getting this life cover in the first place. The life cover is basically our way of giving our loved ones with the appropriate safety net in the event that something happens to us. We will not be able to achieve this objective if cost is the major factor in your decision. Nonetheless, it is still incumbent upon us to get an insurance policy that we can actually afford.
The term insurance provides protection cover to the policyholder for a fixed schedule. The term insurance can run for one year and up to a maximum of ten years. The protection cover of a term insurance lapses once the specified time frame is completed. Thus, the named beneficiaries can claim the death benefits of a term life insurance only in the event that the policyholder dies within the specified timeframe of the insurance policy. This type of insurance policy is appropriate if cost is a major consideration.
While you are seriously considering a term insurance, it is imperative that you look into the special type of this kind of life cover where the death benefit decreases for every anniversary that passes. This being the case, the death benefit that will accrue to the beneficiary shall be at maximum when the policyholder dies within the first year of the life cover. Thereafter, the cash proceeds will slowly decrease until it reaches minimum during the last twelve months of the policy.
A life insurance policy provides cover while at the same time generates cash value as you increase the number of premium payments made. You can look at the cash value as tax exempt form of savings that you retain as cash reserve of your policy. This cash reserve can be claimed as the cash surrender value if you decide to discontinue with your insurance cover starting from your policy’s first anniversary. In case the policyholder dies while the life insurance is in force, the named beneficiary or beneficiaries are entitled to the death benefit as stipulated in the policy contract. There are two types of life insurance cover; the universal insurance policy and the whole life insurance policy.
The whole life type of life insurance is the simpler form of the two types of life insurance cover. The basic feature of this type of life insurance is that the premium amount will remain the same throughout the entire term of the insurance cover. Under this type of life insurance, the policyholder has no control over the investment decision of the insurance company.
On the other hand, the policyholder will enjoy a greater degree of flexibility with the universal life insurance as he is given the option to adjust the amount of premiums to be paid by applying the cash reserve. The policyholder may also elect to increase the value of insurance cover.
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