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

1. Protection against specific events like death, accidents, sickness etc
2. Investment through regular premium

Life insurance is classified into two categories. These are given below

1. Term Life insurance
2. 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

1. Traditional whole life
2. Universal Life
3. 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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