Most of us believe life insurance is just another technique to suck money from us, created either by a company or the government. But take a second to look into the history of this concept. Life insurance has been around for as long as one can remember. In around 600 BC, the Greeks and the Romans created a fund system to help families pay for expenses such as funerals of deceased members. In the United States, in the late seventeen hundreds, in New York and Philadelphia, funds were gathered to help impoverished widows and children. Though this may not sound like your insurance company of today, this did in fact lead to the creation of several insurance companies. Life insurance is an understanding between the insurance company and an individual on a sum of money which will be given to a beneficiary (named by the individual) upon the death of the individual.
Why?
We frequently question why we need life insurance. The first answer that comes to my mind is “peace of mind”. The second important reason would be to support family members during this traumatic loss and cover cost incurred as a result of death. The costs could include large medical bills and funeral bills. Receiving money at this time would help relieve a lot of financial stress. Life insurance can also be a method to provide for survivors such as spouse and children. Reason enough!
Types of Life insurance
The most confusing part about life insurance is buying the right kind. Below listed is a brief explanation of each:
Term life insurance: This insurance, as the name suggests, covers the insured for a fixed amount of time, 10 years, 20 years etc. The con of this type of insurance is that at the end of this term there is no cash back. Insurers, who buy such a policy, do so with the intention that within the “term”, the household will be independent of the insurer for all financial needs, i.e. mortgages paid off, no more car loans and kids off to college.
Permanent life insurance: This insurance covers the insured for the entire life span as long as premiums are paid. Cash back is a guarantee at the time of death.
What should life insurance include?
This question depends entirely on your need. A few things that will help you buy the right kind of life insurance are:
- How much income will your family need to survive after you die?
- Compare various products and find the one that suits your need whether it is term or permanent.
- Can you afford the premiums?
- What factors affect your premium? Does it increase with age? Do premium amounts change with health conditions?
Life Insurance in North Carolina
The North Carolina life and Health Guaranty Association protects insurers against the unlikely event of insolvency of an insurance company. In addition North Carolina protects insurers by rules such as:
- Free look: Where an insurer has the freedom to cancel a policy within a fixed period.
- Death benefits must be processed and settled within two months if all paperwork is in order.
- Grace period provided for up to 30 days if a premium is missed.
