Table of Contents
- 1 What Is Life Insurance
What Is Life Insurance
Life insurance (life assuranceis a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money (the benefit) in exchange for a premium, upon the death of an insured person. Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policy holder typically pays a premium, either regularly or as one lump sum.
Life is beautiful, but also uncertain. Whatever you do, however smart and hard you work, you are never sure what life has in store for you. It is therefore important that you do not leave anything to chance, especially ‘life insurance’. As death is the only certain thing in life, apart from taxes, it pays to insure it well in advance.
In other words “life insurance” is a financial product that pays you or your dependants a sum of money either after a set period or upon your death as the case may be.
History Of Life Insurance
The first life insurance policy was made in Royal Exchange, London on 18 June 1583. A Richard Martin insured a William Gybbons, paying thirteen merchants 30 pounds for 400 if the insured dies within one year. The first company to offer life insurance in modern times was the Amicable Society for a perpetual Assurance Office. That was founded in London in 1706 by Willian Talbot and Sir Thomas Allen.
What is a Life Insurance Premium
Insurance premium refers to a specific amount to be paid periodically by the insured individual to maintain their insurance coverage. For deciding the premium amount an insurance company examines the type of coverage.
In other words “life insurance premium”is the amount of money you pay your life insurance company in exchange for your coverage.
Benefits of Life Insurance
1. Liability Free
Life insurance gives your family the power to be independent and self-reliant. A good term plan can help them repay ﬁnancial liabilities like home loan, auto loan, personal loan, or a loan on credit card.
2. Income Replacement
If you are the sole breadwinner in your family, a life insurance plan becomes can provide a guaranteed income to your family every month. Making sure that their everyday life is not disrupted and they remain ﬁnancially stable.
3. Education and other expenses for dependents
The payouts from life insurance can help to pay the bills for the education of your children, as well as expenses for their wedding or medical costs.
4. Immediate Expenses after Demise
It will also help your family cover a part of essential expenses immediately after your demise, such as funeral costs and/or medical bills.
Why We Need A Life Insurance
- For ensuring that your immediate family has some financial support in the event of your demise.
- To finance your children’s education and other needs.
- Have a savings plan for the future so that you have a constant source of income after retirement.
- For ensuring that you have extra income when your earnings are reduced due to serious illness or accident.
- To provide for other financial contingencies and life style requirements.
- Dealing with Debt.