Life insurance is a unique kind of insurance contract, where the insurance company guarantees the payment of a sum of money to a beneficiary in case of the death of the insured, all of whom are determined by the policy holder. Life insurance generally protects a person from the risk of the death of the one upon whom he or she is generally reliant for income or basic necessities. This assures those left behind that the intermediate financial needs of the insured’s dependents will be provided for.
Life insurance also has some other uses. First, it can also be used as a sort of investment product. Being a long-term contract, the premiums paid will eventually earn interest over a long period of time. Second, it can also be an estate planning tool. Whether an estate is guided by a will or not, estates will often have to settle outstanding debts as well as taxes. Life insurance can provide a readily available fund source to answer for these expenses and liabilities against the estate.
Unlike other insurance contracts, there is no real limit to how much a person can insure his life, as the value of a life of a person is immeasurable. Nevertheless, the extent of the cash value of a life insurance policy that a person can reasonably ask for may depend on several factors. Insurance companies have pre-existing formulas for determining the life expectancy of a person, given information about the person’s health background and lifestyle. Once the life expectancy has been determined, an insurance company will then refer to a fixed table to figure out the premium to be paid, provided the policy value the policy holder chooses.
Claiming death benefits entails providing proof of the death of the insured, usually through a death certification. Insurance companies will provide a form that should be filled out and, where provided by state regulations, notarized. Insurance companies have the right to investigate the death if the circumstances are questionable. In some cases, such as concealed illness or suicide within two years of the effectivity of the policy, insurance companies may even outright deny the claim.
There are many different kinds of life insurance products in the market. The advantages and limitations of each kind will vary, depending on the ultimate goals of the policy owner. Choose one that best fits your needs.
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