Life Insurance: Types, Benefits And Process Of Claim Of Settlement

LIFE INSURANCE

The need to secure one's future (beneficiaries such as wife and kids) is the major determinant factor for purchasing a life insurance policy.

Life insurance is a contract written, documented and signed between the insurance companies and the insured (person purchasing life insurance). The insurance company pays a certain amount as a death benefit to the beneficiaries of the policyholder upon his demise. Some other conditions such as complicated health issues or terminal illness can attract payment from the insurance company depending on the terms of the contract agreed upon. The sole purpose of life insurance is to guarantee the insured's peace of mind that when he or she is deceased, the beneficiaries of the deceased will receive a huge sum of money to alleviate financial loss or hardship. In a nutshell, the need to protect the surviving dependents of the policyholder is the real purpose of purchasing life insurance.

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Agents of the insurance companies or brokers are tasked with the responsibility of assessing needs to determine the type of life insurance policy for the policy to be bought by the person seeking to purchase one. Several life insurance policies are available for purchase to the public by the insurance company, examples are term life and permanent insurance policy.

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TYPES OF LIFE INSURANCE

The following are types of life insurance;

1. TERM LIFE INSURANCE

This type of policy is the best to buy as it is easy to understand and provides coverage for the insured at an affordable price. Term life insurance coverage lasts for a specific period of time ranging from 10,15 to 30 years, once the policy length elapses, the coverage ends. The insured can decide to move on or renew the coverage policy at a higher price.

The best life insurance policy coverage that can be purchased is term life insurance because unlike other various policies, it is affordable and offer just pure death benefit protection only, and without any build up of cash value within the policy.

2. PERMANENT LIFE INSURANCE

Permanent life insurance differs from term life insurance because unlike term life insurance, it has no time limit, offers cash value build-up components and death benefit protection. Permanent life insurance is required to last the remaining of the insured's lifetime, as long as the premium is been paid. There are several types of permanent life insurance which includes whole life insurance, universal life insurance, and variable life insurance.

3. WHOLE LIFE INSURANCE

Whole life insurance is arguably the simplest and easiest type of permanent life insurance. The premium amount within this type of coverage is fixed and will remain the same throughout the entire lifetime of the policy, this, in turn, is very helpful to those who need to stay focus to a budget. This means that if someone purchases whole life insurance policy at a very young age the premium amount paid will be the same even if he or she get old regardless of any adverse effects or retrogress and complications of their health.

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4. UNIVERSAL LIFE INSURANCE

This is another form of permanent life insurance. Universal life insurance is less rigid than whole life insurance coverage because the policyholder is allowed to dictate how much of his or her premium should go towards the policy's cash value and how much should be got to the policy's death benefit with guided instructions. Universal life insurance offers both death benefit and cash value component and the funds are able to grow tax-deferred under this policy.

The policyholder has access to the cash value account, the cash can be borrowed or withdrawn for several reasons examples which are cases of emergency purpose, for vacation purpose or paying off life-threatening debts. All this is attainable because the policy is permanent life insurance.

5. VARIABLE LIFE INSURANCE

This form of a permanent life insurance policy also provides a death benefit and a cash component. Variable life insurance policy allows the policyholder to partake in various investment options, for example, equities. This means there is opportunity got their funds to grow at a wide margin to the funds in the whole life policy. Also, there is a possibility of risk evolving as funds are exposed to the inclinations and declinations in the equity market.

Moreso, the death benefit in a variable life insurance policy may increase or decrease but will not go below the normal amount guaranteed which is the legitimate and original amount set at the time of the policy purchase.

BENEFITS OF LIFE INSURANCE

1. Coverage of health expenses: These policies make provisions for the coverage of health-related issues and other hospitalization expenses.

2. Opportunity for investment and creation of wealth: Some insurance companies invest insured funds in business that yields positive outcome, this help promote saving and increase the chance of wealth creation.

3.  Offers different plans for usage: Insurance companies create and provide certain plans for the insured's need depending on the policy agreed upon.

4. Risk minimizing and coverage: The insured's beneficiary receives monetary compensation from the insurer as risk coverage.

5. Access to loan: In some specific policies of the insurance companies, the insured have access to loan certain amount from the insurance companies.

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PROCESS OF CLAIM SETTLEMENT

The beneficiaries of a life insurance holder upon the demise of the holder would be required to send claim intimation form as early as possible to the insurance company. Date, the cause of death and place should be contained in the intimation form. Subsequent information can be asked for by the company. Like,

1. Deed of assignment

2. Death certificate

3. Copy of the insurance policies.

4. Legal evidence should in case the insured did not provide any beneficiary before his demise.

The insurance company will verify the documents and if found valid, the company will compensate the family as agreed by the terms and policy of the insurance.

FACTORS THAT DETERMINE LIFE INSURANCE PREMIUM

1. AGE

Age is the primary factor considered in determining life insurance premium, the older one is when getting a life insurance the higher the premium to be paid, the company puts this into consideration first, because they want to make sure the insured does not die soon or too early since they are to pay upon his death.

2. GENDER

It's been proven statistically that women live longer than men so the premium to be paid by a woman of age 40 will be lesser compared to the premium to be paid by a man of the same age.

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3. PHYSICAL CONDITION

Insurance companies offering life insurance policy coverage also take into consideration weight -to- height of a person before he or she will purchase the policy. There's an ideal range so anything exceeding the ideal range will attract more premium to be paid.

4. HEALTH ISSUES

Some health issues linked to smoking and chewing of tobacco can increase the premium by 15-20%, it is advisable to quit smoking to lower the premium to be paid.

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5. MEDICAL HISTORY AND FAMILY'S MEDICAL HISTORY

The premium to be paid for purchasing a policy might be higher due to some genetically related health issues, medical records and family's Medica records will be considered before insurance company agrees to allow anyone purchases any of their policies.

6. OCCUPATION

Some occupation involves less risk and some involve greater risk which may, in turn, lead to health complications or pose as death threats. More premium will have to be paid depending on the high-risk level of the occupation.

Lastly, life insurance policy coverage should be purchased as it has more benefits compared to the adverse effects.

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