Things To Look For In A Life Insurance Policy
Life insurance is one of the most significant financial decisions you make in your life. It does not only provide financial assistance to your family but also leaves a non-taxable amount for them after your death. Despite the significance and universal applicability of a life insurance policy, there is some confusion, and in most cases, skepticism, which keeps people away. One of the reasons is the complexity of the policy, the reliability of those who sell it, and the tendency of avoiding the topic related to our death.
In 2020, 54% of the population in the United States own a life insurance policy. There is a good percentage of people who are going to leave their families in financial distress when they die. A considerable amount of the insured population percentage consists of underinsured people. The point is that we have to stop taking life insurance as a grudge purchase and give due credit to its merit.
Why Is Life Insurance So Important?
One-third of the Americans will feel the repercussions within a month after their primary earner passes away. Life Insurance is not just an option in today’s time; it is a necessity. Here are some of the reasons why a life insurance policy is must-have:
If you pass away, your life insurance policy will pay off the debts that you leave behind, without causing trouble to your family. Your mortgage, car loan, credit card bills, and even the expenses of your funeral can be covered with a comprehensive life insurance policy.
Provide For Your Family
If you are a sole-earner of your family, your absence can hamper the education and life goals of your children. A life insurance policy can make sure that your children go to a college, buy a home, and it can even pay for their wedding if you die unexpectedly.
Supplement Your Retirement
Your permanent life insurance policy can accumulate a cash value during its duration, which can supplement your retirement when the other investments fall short. You need to make sure that you compare the prices before investing in a permanent life insurance policy for a good bargain.
Protect Your Business
Whether you are funding a buy/sell agreement, insuring your key employee, or provide tax-free cash infusion, which can be borrowed against the cash value of your permanent policy, life insurance the best asset your business can have.
There are so many life insurance policies and the policy providers that it becomes critical to do your homework before investing in one. Ensure that the coverage can protect your assets and financial wellbeing. Before you decide to invest in a life insurance policy, you need to consider some things that can make it worth your while.
When you decide to buy life insurance policies, it becomes imperative to understand what is covered by the policy and what is not. The policy provisions which are covered by your life insurance policy are the inclusions. In simple terms, inclusions are the events that are insured, and the occurrence of these events will result in some compensation. However, your policy inclusions will specify the circumstances under which the death benefits will be received by the nominee. You need to understand your policy thoroughly to utilize it better. Many policies come with additional coverages, which can incorporate critical illness coverage, accidental coverage, and monthly income for a certain number of years after the receipt of the lumpsum payments, etc.
The policy provision, which specifies the elimination of certain risk coverage, is an exclusion. So, some events or conditions specified as exclusions, won’t be covered by your life insurance policy. The increased number of exclusions narrows the scope of the life insurance policy, and you need to look at what all is not covered before you decide to invest. The understanding of these exclusions will keep you prepared for all kinds of eventualities and therefore help you keep a clear head about how the policy is going to help in each case. Some of the most common exclusions include self-inflicted harm, suicides, pre-existing medical conditions, and lifestyle diseases.
The life insurance policy provisions which specify certain conditions to the life insurance policy are known as restrictions. Know about the restrictions defined in your policy to avoid any unpleasant claim experience. Any unawareness can turn costly for the policyholder. Some of the common restrictions in the life insurance policy are the minimum entry age, maximum entry age, maximum and minimum term assurance rider, maximum coverage ceasing age, the sum assured, etc. Understanding your policy restrictions in detail will help you buy the best life insurance policy that can help you meet the specific requirements.
Claim Settlement Ratio
The claim settlement ratio shows the number of claims that an insurance provider has resolved in one financial year. The total number of claims settled, against the total number of the claims received, makes up the settlement ratio. If an insurance provider has an impressive claim settlement ratio, this means that in the event of a claim, the insurance provider follows-up quickly and has robust settlement practices in place that help to expedite the process. This ratio can help you choose the best policy provider since the main benefit of your life insurance policy is the claim that will be received by your nominee when an insured event occurs.
A lapse in any insurance policy means that the policy is not an active contract anymore. Policy lapses when the payments are not made on time, and when the gross period is crossed as well. However, some insurance companies offer options to reactivate the policy within a specified amount of time, after the grace period has passed. The policy can be reactivated by paying the unpaid premium, including a certain amount of interest on your unpaid amount. The reactivation period is known as the revival period and differs as per the regulations of the insurance providers.
Advance Benefit Payment
In case you die unexpectedly and some considerable expenses or payments need to be taken care of, for example paying for the funeral, your family can have some trouble claiming the lump sum payments on such short notice. If your life insurance policy has an advance payment option, your family can get the payment immediately after your death, and they won’t be worrying about how to make ends meet in your absence.