How does life insurance work?

How does life insurance work?


The world of insurance, because of the diversity of its services, offers you an incredible amount of products. Therefore, it is very easy to lose sight of the original purpose, the reason why you should buy life insurance in the first place. Also, the fact that you are buying something and not having a physical, tangible item in return can make the notion a bit more abstract to you. However, when you do your grocery shopping, you fill your basket, go to the checkout, pay and leave with your products. Insurance is a bit of the same principle, except that you are buying the money for later, at the end of the day. See how life insurance actually works in this article.

The basics of life insurance

Regardless of the type, when you take out insurance, it is to protect a property or investment, for example, your home, your boat, your stamp collection, and that, in case something bad happens. So you'll understand, insurance is just in case ... Do you find it sad to pay for "just in case"? You will find it even more distressing not to be able to replace your motorbike in the event of total loss! Life insurance follows the same path. Except here, you are the insured and not an asset. As a general rule, therefore, the purpose of life insurance is to protect the insured person in the event of death.

In life insurance, especially because you are insuring yourself, you have to name a beneficiary, that is, a person who will withdraw the indemnity from the insurance at the time of your death. You are free to choose who will be the beneficiary of the insurance.

What else to know about life insurance

    What is important to understand in the concept of life insurance is that you take out insurance that you pay for, but in the end it is your loved ones (beneficiaries) who will benefit through free payment. 'tax!
    Just because you want life insurance doesn't mean you can get it. Indeed, there are insurability conditions (age, state of health, employment, etc.) required by insurers. But rest assured, they are still very flexible. The worst that can happen to you is an exorbitant premium imposed on you! But at least you'll have insurance!
    Normally, upon signing the contract, the insurance comes into effect. But some insurers can do otherwise. Inquire!

Financial considerations

    One thing is certain, your life insurance must meet your needs and those of those around you and must be tailored to your personal circumstances. This is why its cost will vary greatly from person to person.
    Besides you, there are several factors that influence the cost of life insurance. For example, insurers greatly take into account the life expectancy of a human depending on his sex, age, region where he lives, risks related to his job, among others. In addition, a person who uses a lot of alcohol or drugs or a smoker will pay a lot more for their life insurance.
    In insurance, the amount of money paid to the insurance company giving you the right to its product, life insurance, is called a premium.
    The length of the insurance is a factor that will greatly vary the premium. This is because term life insurance will always be less expensive than permanent life insurance, since you will only be insured for a specified period (and term), unlike all of life.
    Logically, the higher the amount of life insurance, the higher the premium will be. However, when the amount insured is greater, you benefit from economies of scale so that $ 100,000 insurance will not cost you twice as much as insurance for
    $ 50,000.