Many things happen in life unexpectedly. Some things are good, some are bad.
Nothing changes our lives like the unexpected loss of a close member of the family, and not just emotionally, but financially.
The death of a husband, father, wife, and mother can put many households in a difficult financial position because of the loss of income that person earned before they died.
It is, for this reason, many insurance companies around the world offer Life Insurance.
What is term Life Insurance?
Life Insurance is a guarantee. An assurance that if the family makes regular payments to the insurance company, should something happen to one of the insured family members, the living family members will receive an agreed amount of money paid by the insurance company.
A life Insurance Policy can stop a family from falling into economic problems.
Scenario:
Greg and his wife, Jenny, have two children. Only Greg works while Jenny stays at home to care for their children.
Greg and Jenny decide to take out a Life insurance Policy. They understand that if something happens to Greg, Jenny would not be able to provide for their family on her own.
Greg and Jenny decide on a Life Insurance Policy that will pay-out $1 million dollars in the event of Greg’s unexpected death. In return, they must make monthly payments of $80 to receive this benefit.
About one year later, tragically Greg is killed in a workplace accident. Jenny, a stay at home mother of two, has no employment and cannot provide for her family during this difficult time.
Shortly after Greg’s death, the Insurance company pays Jenny the agreed $1 million dollars. She now has the money she needs to care for herself and her two children.
Life Insurance Terms
- Policy – The contract between the family and the insurance company is called a Policy and contains all of the terms and conditions.
- Coverage – The conditions of insurance.
- Insured – The family members covered by/named on the policy.
- Payout – The agreed upon amount of money to be paid by the Insurance Company.
- Excess – A fee payable to the Insurance company upon payout, thereby closing the policy.
- Payments – The payments made by the insured/family to the insurance company.
- Pre-existing medical conditions – Any health problems a person may already have.
Life Insurance Conditions
Life insurance is not available to everyone. Most Insurance companies do not insure a person who already has a fatal disease, is a smoker, or abuses drugs and alcohol.
Why? Because such a person may die at a younger age due to the addiction or disease they already have. Some Insurance companies may still cover you. But you will have to disclose any pre-existing medical conditions such as heart problems, history of cancer in the family and so on.
Part of the application process usually includes a full body check-up by an authorized doctor.
The application includes questions about the type of work the person does, is it dangerous, etc.?
The amount of the payout and the payments expected are calculated by the age, health, and other important details of the applicants. A younger person’s family can expect a larger payout as the amount needed by the family would be greater. However, the payments may be less because it is less likely for the person to die.
As the insured person gets older, the agreed upon payout amount may stay the same or decrease, however, their payments would probably increase as they near the end of their natural life.
Should I get Life Insurance?
Not all countries offer life insurance. And some Governments have systems in place to care for families that may fall into distressful situations.
If it is available in your country, Life Insurance is a personal decision. But do your research well and make sure you read the policy conditions and coverage before signing on the dotted line.
Do you understand what Life Insurance is now? Would you like to have life insurance? Let us know what you think by leaving us a comment below. Remember to have a look at our other articles on the website too.
