Instruments of Life Insurance

A life insurance policy is actually a contract between you and the insurance company and it is very important that you understand the components that make up the policy. There are different types of life insurance policies; however, the basic policy will charge you a premium fee every month and in the event of your death, will pay a specific amount of money to the person you choose as a beneficiary as long as the payments have been kept up to date and that the contract is still in force at the time of the insured death.

The benefit listed on the life insurance policy is the amount that will be given to the beneficiary when the insured passes away. In the majority of cases, the amount will be paid in one lump sum; however, there are other options according to the insurance company you choose as your provider.

Life InsuranceWith life insurance, you will hear the term death benefit which just means the proceeds of the policy or the face amount of the policy. An example, if a person purchases a $100,000 policy then that would be the death benefit that the beneficiary would receive upon the death of the insured person. In most cases, the money received will be used to pay for the final expenses that are needed such as unpaid medical bills, other debts, and of course funeral costs.

In other cases, the benefits can be used to help care for the survivors of the insured such as their spouse or children. In most cases, the money is used to care for the survivors is when the insured was the primary income earner and the loss has placed the family in financial hardship.

Another type of life insurance allows you to accumulate a cash value or what is known as an investment that allows the insurer to borrow money against the policy.