A life insurance policy represents a contract between an insurance company and the policyholder. As per the contract, the policyholder pays a specific amount as the premiums to the insurer during his life and the insured pays in return to the nominated beneficiaries.
To elaborate further, we can say that the risk of economic loss that may be caused as a consequence of the death of an insured person can be transferred to the insurance company. A life insurance policy plan provides financial protection to the survivors after the demise of an insured person.
What is the purpose of a Life Insurance Policy?
Life Insurance Policy aims at protecting the family of the deceased from the financial issues that they might face after the death of the insured. The benefits of a life insurance policy comprise of the:
- Compensation for the income that could have been lost in the case of the insured’s death
- Payment of educational expenses of dependent children of the deceased person
- Payment of a home mortgage
- Provision of liquidity of multiple expenses following the death of the insured person
- Coverage of all the expenses incurred on the funeral of the deceased as well as medical expenses
Financial Protection or Saving?
Since everyone needs money to continue with their day-to-day activities, they feel insecure in case of any financial disaster or the source of income vanishes. They entirely depend on their income source and try to minimize the risk of financial losses by insuring their life and assets.
A life insurance investment in Plymouth aims to provide protection to the heirs of the deceased. Though some insurance policies provide saving plans like private placement life insurance to provide cash value based on life insurance benefits, the main purpose of a life insurance policy is to give economic protection. People keep financial protection as the priority, the savings plans are of secondary importance.
Suppose a person plans to invest for saving purposes. In that case, he should consider other options that do not charge any commission or charge a comparatively lower amount than that of saving through a life insurance investment plan.
The amount earned through savings or investments through life insurance is tax-deferred. However various savings and investment plans apart from life insurance also provide tax-deferred earnings.
Which Type of Insurance plan is more considerable?
Basically, life insurance plans are of two types:
- Pure Protection Plan
- Protection and Saving Plan
Pure Protection Plan:
This insurance plan provides an amount to the surviving dependents in case of the death of the insured person.
Protection and Saving Plan:
A Protection and Savings plan is financial security for long-term objectives. A person considers it when he aims to purchase a house, secure educational payments for children, etc
What factors should you consider while buying a life insurance policy?
Before owning a life insurance policy, a person should consider a few things thoroughly:
- Expenses needed to incur at the time of death,
- Expenses of the dependents to carry on their daily-based activities,
- Payments on debts like mortgages or loans etc,
- Payments for special needs like health and educational expenses of the surviving dependents and;
- Retirement income for the surviving spouse through a life insurance retirement plan.
What to do next?
Once you have decided whether you need an index universal life insurance in Plymouth, Michigan, or not, the next step is to consider the factors for your security. You must ensure the following things before you partner with an insurance company in Michigan:
- Make sure that the insurance company and the insuring agent are licensed and registered. You can do this by calling DIFS toll-free at 877-999-6442 or by visiting www.michigan.gov/difs.
- The insurance company or the insurance agent should make you fully familiar with the insurance policy. If you are not clear about the policy, you should not consider it further.
- Before signing the application for the insurance policy, revisit all the clauses and terms.
- Pay your premiums of life insurance to the registered company that insured you. You should not pay any premiums to the agents.
- Get a clear knowledge of the “free-look” period of your insurance policy. Free-look period is usually 10-30 days. It allows you to continue or cancel your policy in case you change your mind.
- If the insurance policy that you have purchased is substituting an already existing policy, don’t cancel your existing policy until the new insurance policy is delivered and you revisit it during the period of free-look.
For further information about insurance policies, you can visit www.michigan.gov/difs under “Publications” and “Guides.”