We all know that a life insurance policy is to insure your life and make it easy for you loved ones- long after you are gone. But there are lesser known facts about life insurance. Read on to find out more about them. These facts will help you make wiser decision when you choose your life insurance policy.
How it works?
Depending on your current life style and inflation, you decide on a particular amount. This is the amount that the insurance company is liable to pay your dear ones in case of your death. In order to provide you with this benefit, the insurance company charges some nominal fees- this is the premium that you will be paying to the company. You pay a monthly, quarterly or a yearly premium. In case anything bad happens, your family would get the entire sum assured and there would be no need to pay the remaining installments.
How much premium do you pay?
This typically depends on the type of cover you are looking for. Generally there are three types of life insurance policies available in the market.
- The term insurance: This is a pure life insurance policy. Meaning, the sum assured will be paid to your family in case of your death during the term of the policy. If nothing bad happens to you during the term of the policy, no money will be refunded to you. It is a policy that provides pure life insurance only. It has relatively less premium amounts.
- Whole life: This type of policy can be clubbed as an investment option as well. The policy ensures life insurance, as long as the premium is being paid. The premiums are relatively higher, when compared to the term insurance policies.
- Universal life: This type of policy has its premium rates which are based on the current interest- rate assumption. So you get an added advantage of using this as an investment option too- along with the life insurance cover that you would be getting by default.
What is underwriting?
Every insurance company will access your risk before approving your insurance. This is called as underwriting. This is to make sure that you are fit and fine- with no previous aliments before the company insures you. You will have to undergo a medical examination to prove that you have no previous aliments. Thereafter, you are ready to take the insurance policy. However, if you are insured through your company, you insurance provider may wave-off this risk assessment.