Life insurance has always been a popular way to ensure that families are financially protected in the event of the insured person’s death. Life insurance has two distinct categories: The Life Insurance Policy and the Variable Life Insurance Policy. The former is basically a contract between an insurer and an insured individual, in which the insurer pledges to pay out a fixed amount of money to an insurer upon the insured individual’s death. In return, the insurer is entitled to a certain amount of returns, which are calculated by the insurer’s premium. These contracts also grant the insurer some financial flexibility, as it can claim premiums at a time when it deems necessary, unlike fixed life insurance policies.
Variable life insurance policies differ from life insurance policies in that they give rise to an additional premium based on several factors, such as the cash surrender value of the policy, your age and health at the time of taking out the policy, the cost of your death benefits, and so on. The death benefit also called the benefit amount, is determined by the insurer. As with any other contract, it can be terminated or modified, with termination triggered by either party, by paying a specific amount of additional premiums, prorating premiums over a specified period, or by paying the entire face value of the policy in full. If the insured party terminates the contract early, without paying additional premiums, the cost of the death benefits will be repaid to him/her. However, the insured party is fully liable for the additional costs that would have been incurred if the policy had continued, such as, payment of life insurance premiums and/or the payments of any additional tax that would have resulted due to the foregoing.
Most life insurance policies are considered “non-participating” since the policyholder is not required to purchase additional coverage under the policy. A policyholder is “qualified” for nonshooting policies if he meets certain health conditions, such as the policyholder’s age does not turn 50, the insured has not been a smoker for the last five years, the insured has not suffered from any of the chronic health conditions that are listed in the Code, except for those conditions recognized by the Aetna or Medicare programs. Also, the policyholder should not be involved in “active participation” in any preexisting health conditions or “self-induced” chronic health conditions. Nonparticipating policies are usually purchased by the term assurance holders, who are individuals who buy a term or whole life policy at a term that is less than their current life expectancy. This helps them to buy a policy at a younger age, at which time they will be healthier and therefore qualified for the premiums.
Death benefits. Under most life insurance policies, there are two methods of valuation of death benefits. One is “cash surrender value” which is also known as “pure cash value”; the other is the method that uses a percentage scale of premiums. The cash surrender value of a policy, also known as the premium, is the amount the insurance company pays out to the named beneficiaries when the insured dies. Although it is the most commonly used, the other method is far more preferable to many.
The benefit of a term life insurance policy is an equal monthly payment during the life of the insured. Benefit levels are generally based on the age of the insured when the policy was issued. In addition to the premium, a certain portion of the benefit is applied as an investment allowance. The value of the investment allowance is determined when the insured dies. A certain benefit amount is included in the cost of the premium. The benefit is then repaid to the named beneficiary when the insured dies, or when the policy becomes renewable.
Other named beneficiaries. If the insured is the beneficiary of a life insurance policy, he is often given a number of other named beneficiaries. These can include a spouse, children, parents, or a specified list of people. Most insurance providers require that at least one beneficiary receives the benefit upon the insured’s death and the remainder must be paid when the policy matures. In some cases, dependent beneficiaries can be designated by the insured.More details about Llama Life can be found at this site.
A term insurance contract usually does not provide any way for the beneficiary to obtain additional funds beyond the death benefit when the insured dies. Therefore, most life insurance policies do not allow the beneficiary to borrow against the cash value of the policy. A few term insurance contracts do allow the beneficiary to borrow against the face value of the policy, but they must return the premium paid within a certain period of time. Another way to add additional funds to a life insurance policy is to sell the policy to another person or to place it in a separate financial institution account.
There are several ways to provide funds to named beneficiaries in a life insurance policy. Beneficiaries may need to obtain life insurance benefits to meet certain expenses or provide financial support to family members who do not have all of the same income or assets. As long as the named beneficiary receives the death benefit and the cost of the policy back, he or she should be able to pay off any debts and retain the amount needed for support. The remaining balance of the life insurance policy, called the cash value, is used as needed by the beneficiary.