Are you thinking about signing up for life insurance? If the answer is yes, then good for you! Life insurance is put in place to protect you and your loved ones. What can you expect when you go through the process to sign up for insurance? Read more below to find out: just how does life insurance work?
What is Life Insurance?
Life insurance is an emotional topic, but one that must be addressed. This type of coverage offers protection against any financial loss that would result from the premature death of the insured individual. The selected beneficiary will receive the proceeds and is thereby protected from the financial impact of the death of the insured – this includes the loss of supplementary income. Premium payments need to be made by the insured and the death benefit will be paid by a life insurance company.
How Does Life Insurance Work?
There are three main components to life insurance. They are a death benefit, a premium payment, and a cash value account.
• Death Benefit – The death benefit is the amount of money that the insured’s beneficiaries will receive from the insurer in the event of death. The death benefit amount is determined by the insured when the policy is put in place. The insurer determines whether or not there is an insurable interest and if the insurer qualifies for the coverage.
• Premium Payment – The insurer determines the amount of the premium needed to cover costs by using actuarially based data. These factors include the individual’s age, medical history, and lifestyle. The insurer will be obligated to pay the death benefit as long as the insured pays the premium.
• Cash Value – A cash value is included with permanent life insurance. It is a savings account that will allow the insured to collect capital that can turn into a living benefit. The capital collects on a tax-deferred base and it can be spent on anything while the insured is living.
How to Qualify for Life Insurance
How much your premium payment costs, and how much the insurer is willing to insure you for all depends on your medical history. When you apply for coverage, the insurance company will likely require you to go through a medical exam with their own medic. You will either have to meet the medic at a clinic, or they may travel to your home – but they will want to collect a full medical history, blood and urine samples and any other tests the insurer will want to learn more about your health and medical history. If you are in excellent health then you will have no problem qualifying for a low premium and a high level of insurance, however if you have pre-existing conditions or the insurance company deems you as a high-risk then you will either have to pay more for your premium, you may not receive the level of coverage you want, or the insurance company may reject your application.
For any questions or concerns you have regarding life insurance, do not hesitate to contact Grand Mutual Insurance.