A Beginner’s Guide To Life Insurance
Life insurance is very important to protecting your family’s finances after you have passed on, but many people do not understand the common terms that are used in the life insurance industry to describe various types of life insurance policies. Understanding common life insurance terms is the only way to make an informed decision on which type of life insurance policy will be best for your family.
Individual Life Insurance Policy
An individual life insurance policy is a policy purchased on the open market by an individual to cover a single person. The premiums charged for these policies are determined on a sliding scale with younger, healthier individuals enjoying lower insurance premiums than what is paid by older individuals. If the premium for the life insurance policy is not paid in a timely manner, then the policy can be canceled under the terms of the insurance policy agreement.
Group Life Insurance Policy
Group life insurance policies cover a group of individuals, typically the employees of a company. The premiums charged for these types of life insurance policies are lower than life insurance policies purchased by individuals because of the large number of individuals paying premiums to the insurance company. The premiums that are paid by younger individuals counterbalance the benefits paid out for the deaths of the older individuals. If additional coverage is desired, any person covered by the group life insurance policy can purchase individual riders or additional life insurance without putting their coverage in jeopardy.
Term Life Insurance Policy
Term life insurance policies are valid for a set period of time, typically between 5 years and 20 years, and expire if the policy is not renewed. During the time that the insurance policy is valid, the covered individual family will receive payment in the event of an accidental death or a death from natural causes.
Life Insurance Riders
Life insurance riders are additional products added to life insurance policies when the life insurance policy is purchased. Common life insurance riders include premium waivers that allow the covered individual to stop paying the premium if they become disabled and accidental death riders that pays an increased benefit if the person dies in a particular manner.
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