Benefits of Life Insurance
Life insurance is a contract between a person and an insurance company to provide money to anyone nominated by the person when the person dies. This is one of the many benefits of life insurance. The money will be provided directly and immediately to the beneficiary or the nominee which could be anyone in the person’s family.
Thus the proceeds will not have to go through the probate like the rest of one’s assets. The person is required to pay insurance premium to the company with which the contract is made. The insurance premiums one has to pay to the companies are calculated depending upon the age group of that person. Another benefit of life insurance is that it provides one’s family members, who are dependents, the means to maintain their quality of life. These funds can also be used to pay off debts and bills which would be a liability for your family members.
There are three different types of life insurance. These are Term, Whole and Variable life. Benefit of Term is that it is the cheapest of all three. The premium, though, is likely to go up periodically. The beneficiary or the nominee is paid the lump sum when one dies. The benefit of Whole and Variable life is that they both offer cash account where the money is invested to grow over time. This tends to act as savings from which one can also pay the premiums. Whole life offers either death benefit or cash value. Cash value is the amount that is available if one surrenders the policy or borrows against it. Variable life is the most expensive of all three. It offers both death benefit and cash value. There is no guarantee on the cash value in the account. The death benefit is allowed to vary with the fund returns in the cash account and hence is more risky. Whole life policies have an option in which one can receive dividends or can apply the dividend to the premium payments. The premium payments in the Whole and Variable policies are fixed and will not move up periodically. Variable life provides a tax free account.
There are two variations to the above three. They are called Universal and Universal Variable life. These are more expensive and more flexible than the above three. Both of them offer tax deferred cash accounts and hence enables a tax deferred accumulation of funds. The Universal Variable life offers full control over the cash account. They also offer investment accounts in which one can invest in stocks, bonds etc. The value of the policy depends on the investments one makes. Hence this is the riskiest policy. The premium payments for both types of policies are flexible and hence put lesser pressure on payments. Some of the policies contain the option of accelerated death benefits. The option enables one who is terminally ill to collect a significant amount of portion while one is still alive and use it for various purposes. The downside to this is that the amount taken out along with the interest charge to account for early payment of benefits will be subtracted from the final amount provided to the beneficiaries.
Prudential in the US offers Term life insurance and Permanent life insurance. In Permanent life insurance, it offers Universal life insurance and Variable life insurance. It also offers a Survivorship life insurance. This insures two people and pays the death benefit when both have died. Another company is the Allianz Life Insurance Company of North America. It offers Fixed Index Universal Life insurance which provides a powerful accumulation potential that will increase the value of the policy, which one can use as a retirement scheme. It also offers Term life insurance and Universal life insurance.
Yet the main benefits of life insurance are still mortgage payments, replacement income, funeral expenses and the ability to pay off debts.
