Life Insurance in Simple Terms

It does not matter whether you get cheap life insurance or one that costs a fortune, the truth is, life insurance works the same way no matter how much or how little it costs. In the most basic sense, life insurance is an investment and a contract. It is a contract between the policy holder and the insurer, or the life insurance company. The policy holder is the person who owns the life insurance policy. When he passes away, a monetary aid is provided for his beneficiaries. The amount of this monetary aid is referred to as the policy holder’s coverage.
 
If the policy holder owns cheap life insurance he gets a smaller coverage; if he pays for a larger life insurance, then he is granted a larger coverage. However, he does not avail of this coverage because it may only be claimable when he passes away. His beneficiaries shall receive this amount and shall decide, within the terms of the contract, when to receive the monetary aid. Some beneficiaries wish to avail of the payout in lump sum, which means that they shall claim the whole amount all at once while some others choose to claim it monthly, annually, or quarterly. Again, the decision all revolves around what has been stated in the contract.
 
Although the principle is simple, there are some instances when the life insurance company would provide some monetary help even if the policy holder has not yet passed away. Usually, life insurance companies provide payouts when the policy holder becomes terminally ill or when he becomes amputated or becomes paralyzed. These exceptions are also stated in the original contract and may even allow for some exceptions to the payout. Most life insurance companies, for example, do not provide payout for the beneficiaries of people who have committed suicide.