Things You Need to Learn about When It Comes to Life Insurance
Life insurance is that asset that takes care of all your liabilities when you are no longer around to support your family. Although many are aware of its perks, there is a lot of doubt surrounding the concept of life insurance. This is because we are not familiar with the terminology and the policy’s various aspects and mostly depend only on the agents for this sort of information.
Here in this article, we have put together the basic facts you need to know about life insurance to help you gain clarity and choose the right life insurance policy according to your needs.
1. The Need
To put it straight, if there is anyone who depends upon you financially, you need to secure their future by investing in a life insurance policy.
2. More Than Monetary Benefits
A life insurance policy’s primary function is undoubtedly to provide monetary aid to your family in need, but that is not all. It gives you peace of mind so that you are not under constant stress for your family’s well-being. At the same time, your family will at least have a sense of security even when you are not around.
3. Types of Policies- Term And Permanent
People are often unaware of the difference between the two types of policies. Term life insurance is taken for a specified period of a fixed such as 10, 20, 30 years, and so on. During this period, the premium has to be paid. If there is a casualty within the chosen period, the claim is issued. If the term is over and no casualty happens, the money is forfeited.
On the other hand, permanent life insurance gives cover for the whole life and has no such restrictions. There are many more such varieties of policies that you can discuss with your broker or your company.
One of the major problems when it comes to choosing the correct life insurance is that people don’t discuss it with their family because no one likes discussing death. However, you need to understand that death is the harsh reality of life and it is inevitable. For your family to stay financially safe even after your death, you need to openly discuss your concerns, liabilities, and responsibilities while keeping the broader picture in mind.
Read on further for information regarding certain terms about life insurance that a layperson is not familiar with and needs to know before choosing the right policy.
5. Waiver Of Premium Rider
Waiver of premium rider is a clause of the insurance policy that waives off the premium payments, in case the policyholder becomes ill, disabled, or gets injured. However, it is not as straightforward as it may sound. To purchase the waiver of premium rider, the policyholder must be less than the specified age, in good health condition, and must not have any disability. Even after all these conditions are met, the waiver of premium rider will be added to the policy only at an additional fee.
6. Modified Endowment Contract
A modified endowment contract (MEC) is considered to be a qualification of tax for the life insurance policies. Such policies have premiums that easily surpass the limits of federal tax. In such a case, the policy must not fail to meet the TAMRA 7 pay test.
An annuitant is considered to be an individual who has the authority to collect payments for pensions and annuity investments. The annuitant could also be a person who owns the contract or is related to a person such as a surviving spouse or a child. The main purpose of annuities is to act as a retirement income supplement. These plans may be incorporated with an employee pension plan or a life insurance policy to derive maximum benefits. The paid amount’s size is usually determined by the life expectancy and the general health of the annuitant, and the originally invested amount.
8. Juvenile Life Insurance
Juvenile life insurance is a permanent life insurance policy that can be bought before a person turns 18 years. It can be considered a financial planning tool to serve the twin purpose of tax advantage and a lifetime benefit.
After reading this article, we are sure you will make a smart choice when it comes to choosing a life insurance policy. Like any other policy or contract, it is essential to understand all its clauses and terms to make a wise choice, and a life insurance policy is no different from it.