In this time of uncertainty, many people are looking for insurance, life insurance in particular, but what is life insurance? How does life insurance protect us from uncertainties?
Let Us Define Life Insurance
It is a legal contract wherein the insurer, which is the insurance company agrees to pay a stipulated consideration to a designated beneficiary upon the insured’s death. Therefore, one can only get the sum amount of money that the policyholder paid for when the insured dies. The insurance will give that death benefit to the beneficiary. Thus, people are looking for life insurance to ensure that the people they will leave behind will ensure that even in their absence due to death, that person or loved ones will have enough life to live by having enough money somehow.
How Does Life Insurance Work?
Life Insurance can be a clean-up fund where it is a fund to liquidate expenses such as burial during illness and be a fund for payment of loans. When you are already dead, your loved ones will have the least worry about paying the loans you left. When you get ill, the insurance company can have your sickness expenses liquidated from your insurance. Your family does not need to worry about paying your hospital bills during your sickness.
Life insurance can also be a life income for the person you will leave behind when you die. Your beneficiary’s money from your life insurance need not be a lump sum but in a monthly payment. In this way, your beneficiary will be able to have a regular monthly income from your insurance. If, for example, your beneficiary will receive an amount of 1 million pesos when you die, these 1 million pesos will divide into the number of months that your beneficiary wishes to receive every month. Still, please take note that this income may be subject to tax.
Life insurance can also be a fund for education. You can have a policy loan or make a withdrawal from the cash value that you can use to pay for your child’s education. That is the beauty of life insurance; you can support your child’s education while you are alive, and at the same time, you are protected and insured while your policy remains in force. If you are to use your policy loan, make sure that you will not have an outstanding loan when you die. Like any other loan, an unpaid policy loan accrues interest that may consume your cash value resulting in lapsing your policy if you opt not to pay your loan. A policy loan not fully paid will affect your death benefit. The beneficiary will receive an amount of death benefit less the amount of your outstanding policy loan.
Life Insurance Can Also Be a Retirement Fund
You can convert your life insurance policy to an annuity. This grant is a series of payments in a specified interval until the death of the annuitant. When life insurance is converted to an annuity, you will lose the death benefit.
Remember, you can avail yourself of different life insurance according to your need or even your budget. Just make sure when you get life insurance, you are decided and convinced because this is indeed a commitment that needs to be allocated in your budget if you wish to benefit during your disability, accident, or even death.