What Is Life Insurance?

A life insurance contract involves the various types of policies that include all the risks that can affect the existence, bodily integrity, or health of the insured. The nature of this contract is compensatory. This is because the insurer is obliged, by collecting an agreed premium and within limits established by the Law and in the insurance contract, to pay the beneficiary or insured a capital, an income, or other agreed benefits, in a situation of death or survival of the insured, or both jointly.

Key Things to Note About Life Insurance

Everything you need to know about a life insurance policy you can figure out by reading the actual policy, and that is why I highly recommend doing so. All you have to do is ask the insurance agent to let you read the temporary life insurance policy so that you know what it includes and how that will benefit you.

Some important life insurance policies will include a rider depending on your health, and if you have one, then you need to know why the rider is placed on the policy. Most people don’t understand what a rider does, but what you need to realize is that riders are there to protect the insurance company for even underwriting you.

My advice if you get a rider is to try to get another life insurance policy from a different insurance company and try to get one without a rider, all companies are different so it just might happen.

In regards to what is included in a cheap life insurance policy, the one thing you need to understand is that less will be included. The reason why you don’t get a whole lot when you get cheap life insurance is because the less you pay, the fewer features you will be able to get.

There are many life insurance policies out there, some have a lot of features, and some are very basic policies that cost very little. Whatever insurance policy you pick make sure it has what you want and need.

A Modified Life Insurance

Modified life insurance is one in which the premiums for the first few years, the number of which is generally pre-determined, remains at a lower cost and there is an increase after this fixed period. For example, in a modified five-year insurance policy, the insurance premiums remain low for the first five years and are increased in subsequent years throughout.

The opposite can also be done where, for the first few years, the premiums come at a higher cost while for the rest of the years throughout, the cost decreases. Another type of modified life insurance is, for example, a modified five-and-ten-year life insurance. Here, the premium costs rise after five years and further increase after another five years.

Modified life insurances come with mostly the same benefits as that of whole life insurance which are:

Guaranteed Death Benefits

The amount that one is insured for is guaranteed to be paid to a named beneficiary upon the death of the insured. This ensures a certain level of financial security to those dependent upon the policy-owner.

Tax-Free Cash Value

The amount paid to the beneficiaries upon the death of the insured is tax-free, and so is the amount spent on insurance during the life of the policy owner.

Loans and Borrowing

The cash accumulated as insurance can be taken out by the policy-owner when required, the ceiling for which is generally up to 80% of the cash value. Loans can also be taken from one’s insurance and paid back later, so death benefits remain the same.

Dividends

Modified life insurance comes with company dividends whenever the company makes a profit in the financial year. These are, however, not guaranteed, and the company is not entitled to pay them when it incurs loss despite what they generally project.

Modified life insurance is useful to those who need a large amount of insurance value as it provides most benefits of whole life insurance as listed above with the additional benefit of allowing customers to pay lesser cash for a fixed period.

When it comes to getting life insurance everybody wants the cheapest policy that they can find, but do you know what is included in the policy? For most cheap life insurance policies the only thing that you can be sure about is you have some coverage, but the big question is whether or not that coverage is any good and if it will be with your forever.