Why is Life Insurance Important?
As we grow older, get married, build families and start businesses, we come to realize more and more that life insurance is a fundamental part of having a sound financial plan.
If your loved ones depend on your financial support for their livelihood, then life insurance is a must, because it replaces your income when you die. This is especially important for parents of young children or adults who would find it difficult to sustain their standard of living if they no longer had access to the income provide by their partner.
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What affects your life insurance rates
- Age
- Gender
- Smoking
- Health
- Lifestyle
Life Insurance Terms
1Annuity
A contract that provides a periodic income at regular intervals, usually for life.
2Beneficiary
The person named in the policy to receive the insurance proceeds at the death of the insured.
Anyone can be named as a beneficiary.
3Dividend
A return of part of the premium on participating insurance to reflect the difference between the premium charged and the combination of actual mortality, expense and investment experience.
Dividends are not considered to be taxable distributions because they are interpreted as a refund of a portion of the premium paid.
4Life Expectancy
The probability of an individual living to a certain age according to a particular mortality table.
This is the beginning point in calculating the pure cost of life insurance and annuities and is reflected in the basic premium.
5Policy Proceeds
The amount actually paid on a life insurance policy at death or when the policy owner receives payment at surrender or maturity.
Why You Need Life Insurance
- Most things that your income currently pays for won't go away if something happens to you.
- You have an aging parent or disabled relative who depends on you for support.
- You own a business and have a partner.
- You have a substantial joint financial obligation, for which another person would be legally responsible after your death.
- Premiums for life insurance are typically lower than for other forms of insurance.
- Peace of mind.
Life Insurance Terms
1Evidence of Insurability
A statement or proof of your health, finances or job, which helps the insurer decide if you are an acceptable risk for life insurance.
2Expense
Your policy's share of the company's operating costs-fees for medical examinations and inspection reports, underwriting, printing costs, commissions, advertising, agency expenses, premium taxes, salaries, rent, etc.
Such costs are important in determining dividends and premium rates.
3Face Amount
The amount stated on the face of the policy that will be paid in case of death or at the maturity of the policy
It does not include additional amounts payable under accidental death or other special provisions, or acquired through the application of policy dividends.
4Free Look Provision
A certain amount of time provided (usually between 10-30 days) to an insured in order to examine the insurance policy and if not satisfied, to return it to the company for a full refund.
5Premium
The payment, or one of the periodic payments, a policyowner agrees to make for an insurance policy.
Depending on the terms of the policy, the premium may be paid in one payment or a series of regular payments, e.g., annually, semi-annually, quarterly or monthly.
The premium charged reflects the expectation of loss, expenses and profit contingencies.
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