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Life Insurance
Life is a gift of God and we all want
to live it to its fullest. But sometimes death takes away our loved
ones, leaving behind loved ones in tears and trouble. If the person who
has died is the head of the family and the main source of income then
the remaining family will face lot of trouble, especially when it comes
to cash. What to do in such a case? How to save the trouble for our
loved ones after our death? The answer is simple, Life Insurance!!!
Life Insurance is
a policy according to which the policy holder pays a specific premium to
the insurance company during his lifetime. In case of this death, the
insurance company is bound by the contract to pay the beneficiaries of
the policy holder. However, it must be kept in mind that not all life
insurances cover all death instances but most provide coverage in the
following cases
Normal death
Accidental death
Sickness
You can sign a contract with your insurance company based on two
policies
Protection against specific events like death, accidents, sickness etc
Investment through regular premium
Life insurance is classified into two categories. These are given below
Term Life insurance
Whole-life or permanent Life Insurance
Most of us know that life insurance covers death in a specified time
period. This is the Term life insurance to its fullest. According to
this the beneficiaries can claim the amount of insurance in case of the
death of the policy holder only if it is in the specified period of the
policy. A disadvantage of this is that it does not offer any other
benefits. It usually covers death from one to 30 years. There are two
types of term life insurance
Level term: the benefit remains the same during the entire period of the
policy
Decreasing term: the amount of benefit decreases as the period of the
policy increases.
The other type of Life insurance is the Permanent Life Insurance. This
offers benefit no matter when you died, irrespective of the fact whether
you live for a year or 95 years. The Permanent life insurance offered by
most of the companies is as under
Traditional whole life
Universal Life
Variable universal life
The next important thing that a policy holder might need to consider is
beneficiary of his policy. A beneficiary is any person that the policy
holder nominates for the benefits in case of his death. The beneficiary
is entitled to all the benefits of the policy. The policy holder has the
right to nominate anyone he wants for the benefits and it is not
important that the beneficiary is his blood relative. The policy holder
can nominate one or more of the following as a beneficiary.
One person
Two or more person
A trustee of a trust
A charity or
Your estate
It is important to keep in mind that if the policy holder dies before he
is able to nominate a beneficiary then by default the premium goes to
his estate.
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