Whether you are young or old, rich or poor, strong or weak, you can never rule out accidents and death. There are countless ways an accident can happen, such as a road accident, and a plane crash. While death may not be such a bad idea to everyone, it usually causes a lot of pain to the loved ones of the deceased. If you are not wealthy, or financially responsible it can also mean the beginning of financial hardship for your family. This is why it is important to have a life insurance policy.
A life insurance policy is a legally binding contract made between you and an insurance company in which the latter promises to pay the person who you have named as your beneficiary, an agreed amount of money, called the ‘benefit’, in the event of your death. In exchange for the promise, you will be required to pay the insurance company a certain amount of money, called the ‘premium’, either as a lump sum or at regular intervals for a specified number of years.
The size of the premium is determined by the insured amount and the cost of insurance. While it’s up to you to choose the insured amount, the cost of insurance is calculated by the insurance company taking into account your age, sex and whether you are a smoker or a non-smoker. Generally, the older you are the more you are likely to die; hence a higher premium. However, it’s never too late to buy an insurance policy because it’s a lot better to leave something to your family than nothing at all.
Upon your death, your beneficiary will be required to produce an acceptable proof of your death, such as a death certificate. If the circumstance of your death is suspicious, the insurance company may conduct an investigation. If it is found to be a suicide, then the contract will become null and void. The insurance company may pay your beneficiary in lump sum or in the form of an annuity. The annuity is paid in regular installments for a specified number of years or until the beneficiary’s death.
Life insurance policies fall in one of two broad categories: protection policies and investment policies. In the first, the insurance company pays an agreed amount as a lump sum or annuity to your beneficiary upon your death. This is true for the second category as well, but here your insurance policy also works like your bank account where the capital grows over time. This is why some people use a life insurance policy as an investment vehicle as well. Click here to find out more about Suncorp life insurance.
What type of policy do you have?
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