Life insurance is a form of policy that is meant to cushion your dependents against any form of financial difficulties in the event of your demise
. It is different from an investment since it guarantees to give benefits should you die. One can also use it as a form of security against which you can take a loan.
In order to know the type of life cover that you will get one has to do through a process referred to as underwriting from your insurer. This is a process that the insurer uses to decide whether to grant you the policy or not as well as to determine the rate of premiums that you will pay. During this process one is judged as per a few factors.
These factors include the age, gender as well as your medical condition. If these factors are favorable then one will qualify for the policy at a relatively low premium. As a result a young individual who has a good medical history will be charged low premiums since such a person is expected to live longer and hence pay more monthly payments. This is in comparison with older applicants who are not likely to live that long.
Life insurance is appropriate for individuals who have dependants that require your financial support. It will come in handy especially to take care of any debts that you may leave behind including the mortgage or even medical bills. As a result it guarantees the financial health of your beneficiaries after you pass on. It is appropriate for families due to their children as well as a young couple since it will be cheaper because of their favorable age.
It is also possible for an individual to purchase insurance on behalf of another individual. This is only in order if that individual grants you permission and accepts to go through the underwriting process. However, the person who takes up the policy will also be responsible for paying the premiums.
There are different types of life cover. The term life insurance is less expensive and relatively easy to understand. It is a coverage that lasts for a specified time duration. It is also possible for one to exchange it for a permanent cover of equal worth without undergoing the usual processes.
The cash value life insurance is a permanent cover whereby it has a savings component that increases with time and can be withdrawn, invested or used as security for a loan. It is classified into whole life and flexible premium policy plans.