No one likes to talk about the necessity of a life insurance policy, but having enough coverage to ensure your family will be provided for in the event of your untimely death is essential. It will allow you to relax, knowing they will be taken care of and will be able to go on about their daily lives, enjoying the same standard of living they always have. A life insurance policy is designed to bring you peace of mind, and it will–if you do your homework and understand how life insurance works.
What Is Life Insurance?
Basically life insurance is a way to provide financially for loved ones when you pass away. If you happen to live a long, healthy life and die at an old age, your heirs will mourn, but your passing won’t be unexpected. However, if you’re young and healthy and become ill or are killed in an accident, your beneficiaries will undoubtedly be young as well. They will need to have a source of income to replace the money you provided them with. A life insurance policy will do just that. A policy consists of an agreement between you and an insurance provider whereby you consent to make regular monetary installments to the provider in return for their promise to pay a stipulated amount of money to an approved recipient.
How Do You Get a Policy?
When you decide you’re in a position to take out a life insurance policy, you will need to contact an insurance provider. Before you do that, you should determine how much coverage will be necessary. If you have small children, they will need to be provided for over an extended period of time. For instance, if your youngest child is five years old when you pass away, your insurance policy should ideally provide for their care through college, which means a total of 18 years or so. After the amount of coverage is decided upon, you can begin your search for an insurance provider. It would be practical to do a little homework ahead of time to make sure the company you’re considering offers a reasonable expectation of return for the money you’ll spend on premiums. A little research will help you do that. Go online and get some insurance quotes from various agencies. You can use them for comparison when you begin calling the brick and mortar insurance companies.
The Policy
After all the preliminary work is out of the way, you’ve decided on the amount of coverage you want, and settled on an insurance carrier, it’s time to get down to the basics–the guts of the policy. Talk to your agent and let them know what sort of coverage you expect and work out the fine points of the agreement. Among other things you’ll need to decide who the beneficiary or beneficiaries will be. Any possible reason for the company not paying out if you die will need to be addressed, such as ruling out payment in the event of suicide.
Application
You will need to fill out an application that will provide the insurance carrier with your basic information, such as name, date of birth, address, and so on. The application will also contain some fundamental background information, such as your health history. If you have had an illness or debilitating injury it may affect whether or not the insurance carrier will accept your application. More often than not an insurance company will require you to take a physical so they can assess your overall health. Although previously existing conditions may not necessarily exempt you from coverage, it could affect your premiums. Certain ‘risks’ frequently cause premiums to be higher, such as smoking, high blood pressure, or a history of certain diseases in your family.
Premiums
Once all the preliminaries are out of the way and it’s been decided that you’re an acceptable ‘risk,’ the agent will determine what your premiums will be. A premium is a regular payment of funds to the insurance carrier that will ensure your heirs will receive the agreed upon sum of money when you die. The amount of your premiums are determined by a number of variables–the older you are the more your premiums will be. If you smoke or are in generally poor health your premiums will be higher than if you’re in good health and don’t smoke. Your premiums will also be higher if your job is considered to be dangerous. After the agreement is signed all you have to do is make sure you pay your premiums on time and your policy will remain valid.
Image: Flickr/Thomas Hawk
Guest post from Payton Price. Payton writes about 
