Life Insurance Explained

In the world today money is the most essential necessity of an individual’s life. It is almost impossible to dwell without money. This is why a person tries to earn maximum possible during his lifetime to provide a decent living to himself and his family. But what if the sole earning member in a family dies? Who will provide financial aid to his family and how? Though there are quite a few answers to it such as will, leaving a legacy behind etc. But the best and foremost option meant for the high as well as the low is a life insurance policy. A life insurance policy as the name suggests not just insures your life but is also the smartest and the most far-sighted way to secure life of those whom you love.

Any individual can take a life insurance policy. In case of children, their parents are supposed to pay the premium. There are policies for different amount. The premium also varies accordingly. A life insurance policy for $50,000 will be charged higher than one for worth $25,000. But besides these the premium also depends on many other factors. The topmost is the age of the individual. A 70 year old man will be charge with a higher premium than a 30 year old individual. Also lesser quantity of risks will be covered in case of the former in comparison to the latter. Alongwith age the occupation and lifestyle of the policy taker also matters a lot. A person who throws his life into danger daily (for example one who is a sky-diver) will have to pay more premium than one leading a simple life. Moreover an alcoholic, heart patient etc. will find his life insurance policy to be more expensive than a strong and healthy individual of the same age.

It is always the choice of the individual which insurance policy to take and from where. This depends on the needs and aspirations of the individual. for instance a person who is supposed to be survived by 5-6 successors or beneficiaries, usually opts for a policy with a good sum of money.

Broadly there are 3 different forms of life insurance policies.

1. Whole life policy- this policy is one where the amount of premium the policy taker requires to pay does not alter with time. The amount of the premium id decided once at the time of taking the policy. This type of insurance enables the policy taker to have some cash-build up during his lifetime that can be either used during the course of the policy or after his death to increase the benefit.

2. Term life insurance begins with low premiums initially. the premium amount increases with the age of the person. since there is no cash build up in this policy, there are no chances of an increment in death benefit.

3. Variable life policy is akin to the whole life policy i.e. the premium is fixed once and for all. The only difference here is that in this policy there should be cash build up as long as the various mutual funds the policy taker has opted for, do well.