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Life insurance is often considered an asset that many include in their long-term financial plans. It is a great way to provide financial security to your nearest and dearest in the event of your death. Life insurance can be used to pay mortgage bills, cover college education, basically help pay for anything you wouldn’t want your loved ones to struggle with.

Many people would love to insure their lives, but the majority don’t go for it because they hastily assume they can’t afford it. The truth is, life insurance has several policies that can work with your budget, needs, and desires. Before you rule it out as too expensive, it is important to understand what it is, how it works, and why your loved ones would thank you if you got it.

What is Life Insurance?

Life insurance is a contract of agreement between an individual (also called a policyholder) and an insurance company. The individual pays regular premiums to his insurer. The insurance company makes a payment to his beneficiary or beneficiaries (called a death benefit) when the insured person dies.

While a death benefit is paid when the insured passes on, a living benefit is paid while you’re still living. Some insurance policies offer living benefits as well as death benefits. Living benefits come in handy in situations of terminal illness or dire financial straits. Your insurer can provide you with funds to sort yourself out. This option allows the insured to be a beneficiary of the insurance policy.

There are two common life insurance policies to pick from; term life insurance and permanent life insurance. A term life insurance policy covers you for a given period of years. In contrast, a permanent life insurance policy covers you for the rest of your life. In terms of cost, term life insurance is the cheaper option for obvious reasons.

How Does Life Insurance Work?

The premium costs for the insurance depend on several things:

• The type of policy
• The amount of death benefit (your coverage)
• Your overall wellbeing

You may be required to undergo a paramedical examination as part of the application process. Insurance companies request this to determine your state of health at the onset of your insurance policy. This examination can be done, at home, work, or a local clinic.

You’ll also need to name one or more beneficiaries. Your beneficiary is the person whom you want to receive the death benefit payment from your insurer when you pass on. Common life insurance beneficiaries are:

• A partner
• Parent(s)
• Brother or sister
• Child (above 18 or 21 depending on your region)
• Charitable organization
• A trust

The person(s) you name will be your primary beneficiary. You are allowed to name a contingent beneficiary too. A contingent beneficiary will stand in for your primary beneficiary and receive death benefits from your policy if your primary beneficiary passes away.

Why Your Family Will Thank You for Getting Life Insurance

Benefits from life insurance are paid only when the insured individual passes on. Only then can their listed beneficiaries submit an authentic copy of the death certificate to the insurance company and file a death claim. Insurance companies are obligated to pay death benefits once required documents are provided and proven valid. Insurance companies are allowed 30 days to review the death claim.

Death claims are best filed as soon as the insured person passes on. Insurance companies don’t exactly keep their fingers on the pulse of their clients; they won’t find out they’re dead until after a while. The period of mourning can be quite harrowing, but the sooner you file the claim, the sooner you get paid.

Death benefits can make the adjustment process easier. The funds can be used to sort out college fees, mortgage payments, burial arrangements, or used to run daily activities. For your loved ones, death benefits can mean one less thing to worry about as they mourn the loss of a dearly beloved.

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