How Does Life Insurance Work?

Caring for ourselves and our families does not stop with health insurance. Life insurance allows us to support our loved ones even if something happens to us.

How Does Life Insurance Work?

Like health insurance, you buy a life insurance policy and pay a premium on it. You can pay it once a month, or once or twice a year. Unlike health insurance, you don’t need to enroll during a specific time frame or enrollment period.

The premiums are calculated based on different factors like your age, your state of health, any different sports or hobbies you have, and sometimes even your occupation. The younger and healthier you are, the more you should go for life insurance.

Here’s a tip: get life insurance before you start any adventures. They won’t adjust the premium after it has already been set.

What are Beneficiaries?

Your beneficiaries are those who will receive the payout of the policy if anything happens to you. You can name anyone you choose to. They are the whole reason you would take out a life insurance policy.

Sometimes you can choose both primary beneficiaries and secondary beneficiaries just in case (knock very hard on wood) something happens to both of you. It’s the best precaution you can have.

How Can Your Beneficiaries Claim the Policy?

Usually, they will need to file a policy claim with your life insurance provider–so make sure they know who that is! Encourage them to keep documents that prove their identity and relationship to you, such as birth or marriage certificates. As long as they are clearly named, the payout should be with them in a few weeks.

What Kind of Life Insurance Policies Exist?

The basic policies are permanent life and term life agreements. Permanent life insurance policies exist for a long as you are paying premiums–basically your entire life. It’s recommended that you take out this policy, to be prepared for any and all circumstances.

On the other hand, term life agreements are policies that only apply for a certain time period. If you only want to take out a policy because of a certain job or trip, this could work better for you.

It might also work if you are not fully prepared to take on a long-term life insurance policy, or if your work is seasonal or time-based. However, as you age, the premiums will just keep going up–so you might want to consider certain kinds of permanent life insurance instead.

What Are Some Riders You Can Look For?

Riders are additional benefits to a life insurance policy that give partial coverage for lesser incidents. In other words, you are affected enough to seriously change your lifestyle, but not enough that they get the full payout.

Waiver of premium rider

With this rider, the insurance company promises to waive your premium but still maintain your insurance claim, if you experience “total disability.” This is different for every insurance provider, so make sure of their terms and conditions.

Accelerated death benefit rider

With this rider, if you are diagnosed with an illness that will shorten your life much earlier than projected, your beneficiaries can already get part of the payout. In this way, you can already provide for their needs especially if hospital bills are involved.

Long-term care rider

With this rider, if you experience anything that requires you to have long-term nursing or home care, your insurance provider will give monthly payouts. This is on top off the life insurance you already have.

Life Insurance Keeps You and Your Family Secure

Life insurance may seem or feel negative, but it’s a simple and practical way to take care of your family and prepare for the future, no matter what the circumstances may be.

James Donaldson

I like to blog about insurance, health and the great outdoors. Memphis born and raised.