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Life insurance is a personal finance product that many people overlook simply because they dont understand it, well we aim to tell you plain and simple how life insurance works and what the benefits are of you taking out a policy today.
When a person opts for life insurance, he or she is basically looking to secure the financial future of family and loved ones should the worst happen. When a loved one dies it can be especially expensive, not least the funeral costs but also loss of income should that person be a breadwinner. Life insurance works by paying out a lump sum to the deceased’s beneficiaries at the time of death.
When someone opens a life insurance policy they will pay premiums, most likely on a monthly basis, which the life insurance company will then invest as they see fit to make profit and returns. In the event of the policyholder’s death, the insurer will pay out the agreed fixed amount to the family.
If the policyholder does not die within the term of the policy then it will expire and he or she will need to decide whether to renew it or leave it. Some might choose not to renew it if they have accrued other wealth and assests that might be sufficient to cover funeral costs and provide for those they leave behind.
There are different types of life insurance which is why you should seek advice when buying this type of finance product.
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