Life insurance policy in usa

Life insurance policy is a contract between on individual and insurance companies. When the policyholder dies the insurance company pays a large amount or benefit to the deceased's estate. In return, the insurance company has to pay regular premiums or installments. Life insurance benefits are not only available after death. Depending on the type of insurance, coverage is available in case of natural death, accidental death, illness or injury.

Life insurance is mainly of two types. Term life insurance and permanent life insurance. Term of life insurance is for  fixed part of time. It has to be renewed after expiry. Permanent life insurance on the other hand provides coverage till death. Term life insurance is relatively cheap in terms of cost. Permanent life insurance on the other hand is quite expensive. Because it never expires.

Life insurance policy in usa

What benefits does life insurance provide?
The main purpose of a life insurance is to pay your heirs when you die. But there are some conditions. Insurance companies do not provide coverage for all types of death. Although the contract contains all the terms and conditions, below are the terms and benefits of the coverage.

Natural Death: Examples of natural death are diseases of old age, heart attack or similar. No matter what type of life insurance you have, you will not get coverage for a natural death.

Accidental Death: Car accident, drowning, poisoning are examples of accidental death. Insurance companies provide coverage on such deaths. Permanent life insurance includes such death coverage. But you can buy accident only insurance coverage if you want. Death by suicide: Most life insurance policies cover death by suicide. However, at least two years of insurance must have passed.

Homicide: If an insured person is killed or killed by someone, the insurance company policy provides coverage. In this case a situation affects life insurance. For example, if someone kills a beneficiary insured, the killer will not receive the death benefit of the life insurance.

Illness or Injury: Apart from death, the insurance company provides coverage for various illnesses or injuries. For example, the beneficiary will receive a death benefit if he or she suffers a serious illness or injury or develops a serious illness such as cancer.

What does life insurance cover?
Criminal activities: If a person is involved in criminal activities then no coverage will be provided to his/her estate after death. For example, you were involved in a drunk driving accident or died. This is an illegal activity. As a result the insurance company will not provide you cover.

High risk hobbies: Many people have some hobbies that are actually very risky. Like sky diving, mountain climbing, ocean wave surfing etc. Insurance companies generally do not cover accidents resulting from such activities.

Misrepresentation: If you submit any incorrect information in your life insurance policy. Insurers can cancel your policy if you lie about your illness or activities. So try to be as honest and trustworthy as possible while applying.

How does life insurance work?

Life insurance covers the life of the insured. The policyholder, who is the insured person, pays the premium to the insurance company at regular intervals. Then in case of an accident the company pays a certain amount to the beneficiaries listed in the policy.

Term life insurance is purchased for a specific period of time. It can be for 10, 20 or 30 years. If the insured person dies within this specified period, the beneficiaries named in the policy get the specified amount. And if a person does not die within that specified period of insurance then no one gets any money. Term life insurance is the most popular. Because it can be done for a fixed period of time and the cost is very low.

Permanent life insurance policies on the other hand usually cover a person till death. This is why permanent insurance is very protective for many people. The coverage amount of permanent life insurance policy increases with age. A portion of the premium paid periodically is added to the coverage. Due to which many people are interested in this type of life insurance even though the cost is high.

Again you can use the cash value of your life insurance while you are alive. You can also borrow that money from the company at a fixed interest rate. In this case, some tax complications may arise. So before taking such an initiative, you must talk to a lawyer.

A life insurance policy provides peace of mind to both the policy holder and their loved ones as it avoids financial difficulties in case of death of a person. So if you have not taken any such policy yet, then you should take a life insurance as soon as possible.