Have you ever wondered why it is crucial to have life insurance? What are the benefits of paying fees and owning a policy nowadays? There are a handful of questions on the topic regarding insurance in general.
First of all, with the extremely rapid development of technology and the progress of humanity, everything is somehow accelerated, uncertain. There are various accidents such as fires, traffic accidents, injuries at work, diseases, unfortunately, etc.
Therefore, it is imperative to find a good insurance company that will be regulated by a significant supervisory authority such as FINMA, for example, responsible for ensuring its customers in the right way.
But before we get to all the crucial benefits of life insurance, let’s first explain what it is and what it all means, shall we?
Life insurance – what is it, and why is it so essential?
Life insurance represents a specific contract between two parties: an insurance policyholder and an insurer, or in some cases assurer. If there’s an assurer on the other side, it means that the insurer has promised to pay a beneficiary, that’s designated, a sum of money in the case of the death of an insured person.
Critical or terminal illness could also trigger payment. However, it all depends on the contract. Generally, the policyholder responsible for paying a premium is the policyholder. He does it either regularly or as one lump sum.
It’s crucial to understand that life policies generally refer to legal contracts. The terms of every particular legal contract describe all the limitations of the insured event. What may cause difficulties is that an event is not clearly defined in a contract. Here’s an example: the insured knowingly incurred a risk by taking medication that has resulted in her death.
What are the two major categories of life insurance?
It’s crucial to understand that life insurance, or life-based contracts, usually fall into two different categories:
- Protection policies: It’s designed to provide a benefit, especially if we talk about a lump-sum payment in a specified event.
- Investment policies: The primary objective of investment policies is to facilitate capital growth by single or regular premiums. For instance, in the United States, standard forms are universal life, variable life, and whole life policies.
It’s all permanent life insurance that covers the remaining lifetime of the insured person. Its policy accumulates a cash value up to its date of maturation. The owner can access the money in cash value by borrowing the cash value, receiving the surrender value, withdrawing money, or surrendering the policy.
Why is it crucial to have life insurance nowadays?
It’s incredibly beneficial to have life insurance these days for several reasons. First of all, it’s always a good idea to have a long-term financial plan and backup in case something terrible happens to you.
Life insurance protects your whole family and provides them with a non-taxable amount in the case of your death. Besides that, it’s also responsible for covering your mortgage and any personal loan, such as your car loan.
It’s essential to remember that your life insurance follows you until your retirement. It means that your employer will no longer insure you once you retire.
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