Life insurance, otherwise known as life insurance, is often considered a financial investment. Because it secures future income for beneficiaries, life insurance can be a highly valuable asset for the insured’s family. Life insurance is a contractual agreement between a policyholder and an insurer. A life insurance policy typically guarantees that an insurer pays a pre-determined amount of money to designated beneficiaries in exchange for the policyholders’ monthly premiums during their lifetime, in return for paying the applicable taxes. When purchasing life insurance, consumers need to determine what kind of coverage they need, how much coverage is needed, and when to purchase additional coverage.
Variable Universal Life (VUL) are two types of life insurance coverage policies. Both are tax-free accounts. A VUL is usually less expensive than an ordinary life insurance policy. Variable universal life policies provide coverage for a beneficiary’s dependents and may also include a death benefit paid upon the insured’s death. The death benefit is paid out as a lump sum, depending on the policy, and may be paid in a single lump sum or over time as a lifetime income stream. In contrast, variable universal life policies pay the balance of the premium at the end of the policy term rather than at the end of the insured’s life.
Many policies provide some guarantee, either expressed or implied, that the policy will pay the death benefit, as well as a certain amount of principal, upon the insured’s death. These policies are referred to as “guaranteed renewability” and are very popular among consumers. Guaranteed renewability means that the life insurance company cannot cancel the insurance policy because of an existing condition or event recognized before the policy was in effect. To some, this is important because it helps cover children or spouses who may not otherwise be able to be covered under their parents’ insurance policy.
The Life Insurance Rider is another type of provision that may be added to existing policies. A rider is essentially a rider added to the Life Insurance policy to increase the amount of coverage for a particular cost. For example, a rider that pays the cost of certain medical treatments could be added to life insurance policies. In addition, riders can be added to an existing policy to increase the face amount of the policy or sometimes to increase the cash value, which is the difference between the actual premium paid and the policy’s current value. There are several different types of life insurance riders, and they can be added to a life insurance policy to create new coverage.
Riders are especially helpful for consumers with health conditions that would make it impossible for them to obtain standard life insurance. For example, a person in a high risk profession, such as a pilot, construction worker, or sport utility driver, will typically be excluded from standard life insurance policies because of the inherent risks associated with these professions. However, if a pilot is added as a rider to a life insurance policy he or she can enjoy the same benefits as other policyholders who do not have such health conditions.
Riders also provide the policyholders with additional benefits. For example, a cash value rider would pay the policyholder a lump sum, usually equal to the death benefit, upon the policy holder’s demise. This lump sum is invested by the insurance company, which may use it to purchase additional insureds on the policy, or perhaps in a CD. A policy holder can also choose to convert his or her life insurance policy into one that features a variable premium. With this option, the policyholder will decide how much he or she will pay in premiums each year, but the premium amount will remain consistent throughout the life of the policy. This allows the premium payments to be based on current investments, as well as future investments provided by the company that handles the account.
The benefits of life insurance policies are not limited to the named beneficiaries. If an insurer has designated more than one beneficiary, the insurer may also choose to offer an unlimited number of Beneficiaries riders. In addition to naming multiple beneficiaries, insurers may also offer riders that allow the policyholders to name a group of dependents, an insurance beneficiary who will receive payments upon the policyholder’s demise, or even create an insurance trust. These additional riders may benefit women of all ages, couples, or individuals with diverse family backgrounds and income levels. No matter what type of rider or beneficiaries an insurance provider chooses to add to a life insurance policy, the beneficiaries will be entitled to a percentage, if not a fixed amount, of the premium.
Policyholders should always consider how important beneficiaries and riders are to them. Different insurers often offer different kinds of benefits and riders, so it is necessary for policyholders to examine their options carefully. Additionally, many insurers will offer discounts to policyholders who take advantage of their services by forming trusts and purchasing multiple policies from the same company. Regardless of what kind of policyholders chooses not to include in their coverage, life insurance can provide financial protection for the named beneficiary or beneficiaries, the dependents of such a beneficiary, and/or the insured’s heirs.