What Is life insurance?
Life insurance is a contract between an individual and an insurance company whereby a lump sum of cash, known as the death benefit, is paid to a named individual (or individuals), known as the beneficiary in the event that the insured dies.
How does it work?
Life coverage works using a very simple concept. In return for the payment of a premium, a set amount of proceeds will be paid out to a named beneficiary (or beneficiaries) if the insured dies while the insurance contract is in force.
The funds that are paid from a life insurance policy are received by the beneficiary free of income tax. That way, loved ones, and survivors are able to make use of the full amount that is provided by the policy.
Today, there are some life policies that also provide “living benefits.” These living benefits can be added as a rider on an insurance policy like an accelerated death benefit rider.
Living benefit riders offer access to some or all of the death benefit proceeds if the insured becomes diagnosed with a chronic illness, a critical illness, or a terminal illness, and must reside in a skilled nursing home facility
Types of policies
There are several types of life insurance coverage to choose from in today’s market. Knowing more about the different types of life coverage available, as well as what each offers, can help you to narrow down the type that is right for you.
Term life insurance
A term life insurance policy consists of death benefit protection only, without any type of cash value or savings component. Because of that, term insurance is usually cost-effective in terms of securing a large benefit for a little premium. With term insurance, coverage is purchased for a set amount of time, or “term,” such as 10-years, 20-years, or even 30-years.
Whole life insu