Life Insurance 101

Like any insurance policy, life insurance and other similar types of insurance depend on many variables. These may include your age, gender and medical history. Therefore, it pays to shop around and factor in your personal situation. This will help you figure out which type of insurance you need and which policy best fits your situation.

How does it work?

Like most insurance contracts, you sign up for a policy for which you pay regular instalments. In return, an eventual pay out is made to the beneficiaries. In the case of life insurance, a lump-sum payment is made when the policyholder dies. This gives your loved ones a safety net once you die, easing the burden of what would be an already stressful time. You can also choose between different payment schedules. Sometimes, your beneficiaries will be able to access an advance benefit without the hassle of a waiting period to help pay for immediate costs.

What is offered?

Basic life insurance covers expenses incurred from your death. This type of insurance can have a set term, where your beneficiaries only get the payout if you die prematurely. Alternatively, it can be permanent, with no time limit for your death. In this case, you have lifelong coverage. Beneficiaries can use payout funds for expenses such as your funeral. They can also choose to put them towards their own personally-incurred life expenses, such as mortgage payments or health care. Another type of life insurance is critical illness insurance. If you become sick with an eligible illness, it will provide you with funds for covering the associated expenses. Best of all, you can choose what to spend the lump sum on. However, for this type, you do need to survive a waiting period to be able to benefit from the cash payout.

Is it covered?

Similarly, disability insurance supports the policyholder in case of a sudden accident or illness preventing them from working. The regular support payments, generally amounting to between 60% and 85% of your normal income, provide some financial stability. It is also available to those who are self-employed, in which case it will cover various business expenses. This type of insurance can help you whether you become temporarily or permanently disabled.
General life insurance has no restrictions on how you spend your benefits, funeral insurance provides coverage for funeral expenses. This coverage generally amounts to between $5,000 and $15,000 worth of costs. Life insurance benefits are often sufficient for covering funeral expenses. However, if this is not the case, funeral insurance may be worthwhile. However, you may live long enough to spend more on premiums than it would cost for an actual funeral.

How do I know if life insurance is right for me?

Life insurance is particularly suitable for those raising a family. How would you cover your family’s living expenses or your kids’ tuition fees if you suddenly fell gravely ill or died? Also, if you have any debt, you won’t want to burden your relatives with payments. Likewise, if you’re the main breadwinner, you’ll want to know that your loved ones’ financial needs will be covered.


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