Through understanding the most common policy from insurers, we can help you to understand the basics of life insurance. (The following is an entirely hypothetical situation to illustrate a point.) One of the more common policies may insure a policyholder for 20 years for $500,000 with premiums averaging under $20 a month (as of 2011). What this means is if you had this policy you would pay the cost of the premium, (e.g. $11, every month for 20 years). If you were to die before the 20 years is up, the beneficiary set up may receive $500,000, tax-free. This sum could help with payments like a mortgage, car notes or a college education.
Besides the term life insurance basics mentioned above, your policy may include a number
of additional riders (extra benefits).
*Accidental Death Benefit – The accidental death benefit rider secures an additional sum of money if a policyholder dies as the result of an accident. Typically, the accidental death benefit may double the value of the life insurance policy.
*Waiver of Premium – This rider typically waives the premiums associated with the term life insurance policy if the policyholder were to become disabled. The policy could generally remain in effect throughout the term, but there may be no additional premiums.
*Accelerated Death Benefit – Typically it could allow an individual to collect all or part of the value of their life insurance policy while they are alive.
*Renewal Provisions – This rider helps guarantee that, at the end of your term coverage, you may be able to renew your policy or upgrade to a permanent life insurance policy even if you would otherwise be uninsurable.
*Family Income Benefit – This rider provides a monthly income to your family, rather than a lump sum.
Most basic life insurance policies will not include these riders, but more thorough policies may include one or several of these riders. We suggest talking to your agent to see if these are included in your policy.
To learn more about the basics of life insurance, we encourage you to
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"Did you know that since 2005 the percentage of U.S. adults without life insurance has nearly doubled?"*