By: A.G. Paphitis & Co Law Firm
Life insurance is a contract between an insurance policy holder and an insurance company, in which the insured agrees to pay a life insurance premium (amount of money paid to the life insurance company) and in return, the insurer company promises to pay a sum of money upon the decease of the insured person or after a set period.
Essential factors in order to set up a life insurance are the policy term and the premium paying term of the insurance. The policy term is the duration of the life insurance coverage. There are whole life insurance plans or the more frequently used plans that cover a specific period of time, which can range from 5, 10, 20 or even more years, depending on the insured person’s needs, desires and financial flexibility.
Between the two, life term tends to be cheaper, but permanent life insurance can offer benefits such as cash value accumulation. Another fundamental element for a successful life insurance is the premium paying term (which comprises the period throughout which due premiums have to be paid).
Who Can Be a Beneficiary?
The whole concept of life insurance is to secure money for certain beneficiaries upon the insured persons death. The insured person needs to designate one or more beneficiaries who will receive the death benefit.
A life insurance beneficiary can be:
- A spouse;
- A sibling;
- A parent;
- An adult child;
- A charitable organization;
- A business partner;
- A trust;
- A friend.
The insured individual can choose a single beneficiary or a primary beneficiary and one or more contingent beneficiaries. If a primary beneficiary passes away, then the set contingent beneficiary would receive the death benefits of the insured individual. The life insurance company should be contacted as soon as possible following the death of the insured to begin the claim and payout process.
It is also worth noting that, life insurance policies can offer both death and living benefits. When dealing with an unforeseeable terminal illness and funds are needed to pay for medical care, a living benefits rider enables the policy owner to access qualifying insurance proceeds.
What Influences the Costs and Premiums of Your Life Insurance?
Every individual that desires a life insurance coverage is viewed in a subjective manner and as a different entity from everyone else.
Factors that are usually taken into account in order to determine the costs and premiums are:
- Gender: Women typically pay lower rates than men their age;
- Health: Previous, inheriting or existing health conditions;
- Age: Life expectancy is the biggest risk factor for insurers;
- Smoking: Smokers are at a higher risk of many health problems;
- Driving records: A history of serious and risky traffic violations;
- Family medical history: Evidence of relatives having a serious illness;
- Lifestyle: A risky lifestyle or job.
Is Life Insurance a Benefit or a Burden?
In general, Life Insurance is considered an additional expense to the everyday life of an individual that desires it, and in some cases the cost of the premiums can be considered very high for people with lower income. On the other hand, it is a smart investment as beneficiaries could use the money to pay off any remaining debts of the insured or themselves.
The insurance benefits can also be left as an inheritance to the beneficiaries, and it can help provide a more secure financial future for surviving family, friends or even charities, if the unexpected happens.
The information provided by A.G. Paphitis & Co. LLC is for general informational purposes only and should not be construed as professional or formal legal advice. You should not act or refrain from acting based on any information provided above without obtaining legal or other professional advice.
For further information please contact us.
