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What Does Life Insurance Cover?

Most people, when looking for a life insurance policy, don’t know its ins and outs. They don’t know, apart from the bare basics, what such a policy entails. Often, they don’t even know the complete benefits of a life insurance cover. In the worst case, they just don’t want to think about the inevitable. Thus they erroneously put off getting life insurance until it is too late.

Life insurance pays an agreed sum to your family if you die within the policy’s tenure. Normally, it is between 5-10 times of your current salary. The payment takes place in one of the following ways:

  • Paid as a bulk or lump sum. This results in money-managing problems on the part of your family. However, it is the most common way.
  • Family income benefit policy. In this situation, the money is paid as a tax-free income to your family every month. The downside of this policy is that it will run only until the end of your policy. So if you die six months from the end of your policy, you family will only receive payments for the remaining months.

Either way the payout from a life insurance policy is beneficial for your family. It can be used to pay off financial debts like car loans, home mortgage and credit card bills. It can also be utilized to cover tuition fees, childcare payments and daily expenses.

Life insurance can have variants. Each is different and tailored to suit the needs of specific individuals. Life insurance is term-based with most terms ranging between 10-25 years. This is the most common option. Normally policy holders opt for a plan that runs the length of the years on their mortgage. Life assurance, on the other hand, covers the whole life of the policyholder and isn’t bound by time. It entails a certain payout which is why it has a higher premium costs.

Both these plans sometimes cover you if you are involved in a terminal disease that greatly reduces your remaining lifespan. If you want cover against critical illnesses like heart attack, stroke or cancer, it is advisable to opt for critical illness cover. You can also utilize the critical illness cover in the event of an incapacitating accident.

Like all insurance policies, it is very advisable to read the fine print before signing up for an insurance program. Most insurance policies have exclusions. They might not cover your death if you die from alcohol or drug abuse. Similarly they may not release a payout if you die from involvement in risky activities. Such activities include the likes of mountaineering, hot air ballooning and rock climbing. Still other policies may not even cover you if you have had a serious illness in your past.

Conclusively, life insurance is one of the most important decisions you will make in your life. Make sure you know all the requisite details before opting for a policy. Also, understand what your policy does for you and what it covers.

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