What is life insurance?

There is no way you can predict the future, or even know what’s to happen tomorrow. With this, you can do nothing but to think prospectively and prepare. Knowing this common dilemma among people, a financial product emerged in the market that has now become a very useful and practical tool to keep your family secured in case you meet accidents and death prematurely. Even if it seems like inviting death itself, looking at it in a subjective way can make us realize that in the end, it is still better to be prepared than to be caught by a surprise that can surely lose all your had work.



For those who are conscious of the reality above, a life insurance is a financial product sold by insurance companies. Insurance companies have devised processes to make this system work. A life insurance is practically an agreement that is legal and substantive in nature. It will require you to pay a certain amount of money which is called a premium. Usually, this premium is derived from the earnings or the capacity of your work. There are times when life insurance policies are already attached to the office where you, upon entering a working contract, will immediately be a policyholder. Being a policyholder, you are required to pay the premium in regular period according to what is stated in the contract. Then, if something happens by the period of the coverage, then the death benefit will be given to the dependents called the beneficiaries.

There are different kinds of life insurance. They differ in their coverage periods and some other features. The most common of this is the term life insurance. In this type of policy, you pay a premium in a fixed period only. This period will expire and then you can decide whether to pursue the policy or not. But, if you decide not to go on with the policy, then you can collect the amount due to you also referred as the death benefit. This is very beneficial to those families with many dependents. If granted that you meet no accidents in that fixed period, then you can use the money to pay for loans and other payables that need to paid in full or cash. It can also be used to get an educational plan for your child who is still young. A universal life insurance on the other hand has a more flexible characteristic which is why people use this as a vehicle fro investment.

The policyholders have privilege to adjust the premium that has to paid and the death benefit that can guaranteed in the end. It also allows cash withdrawal unlike the other kinds of life insurance. They are also more affordable than the whole life insurance policy. A whole life insurance policy is the third type of life insurance. Its policy, the premium to be paid and the death benefit is not changing and thus are fixed already. They do not change throughout the period covered. Therefore, your cash value is guaranteed in a certain amount and is available anytime. But whichever type you think you are suited to purchase, as long as you recognize its importance, then you have made the right choice.