Life insurance is a contract between an individual and an insurance company. In exchange for regular premium payments, the insurer promises to provide a lump-sum payment (death benefit) to the policyholder's beneficiaries upon the insured person's death. This financial cushion helps mitigate the impact of the loss and ensures that dependents have the necessary resources to cover immediate expenses, outstanding debts, and ongoing financial needs.
Types of Life Insurance:
- Term Life Insurance: Provides coverage for a specified term (e.g., 10, 20, or 30 years). Typically more affordable than permanent life insurance. Pays a death benefit only if the insured passes away during the term.
- Whole Life Insurance: Offers coverage for the entire lifetime of the insured. Combines a death benefit with a cash value component that grows over time. Premiums are generally higher than term life insurance but remain level throughout the policy's existence.
- Universal Life Insurance: Provides flexibility in premium payments and death benefit amounts. Accumulates cash value, allowing policyholders to adjust coverage and premiums. Offers an investment component with potential interest earnings.
Benefits of Life Insurance:
- Financial Security for Dependents: The primary purpose of life insurance is to provide financial support to surviving dependents in the event of the policyholder's death. Helps cover immediate expenses, such as funeral costs, outstanding debts, and daily living expenses.
- Debt Settlement: Life insurance proceeds can be used to settle outstanding debts, including mortgages, loans, and credit card balances, preventing financial strain on the surviving family members.
- Estate Planning: Life insurance facilitates the smooth transfer of assets to heirs, helping minimize estate taxes and legal complexities.
- Business Continuity: Business owners can use life insurance to fund buy-sell agreements, ensuring a seamless transition in case of a partner's death.
- Supplemental Retirement Income: Whole life and universal life insurance policies can accumulate cash value over time, providing a potential source of supplemental retirement income.
Life insurance is a crucial component of a comprehensive financial plan. It offers protection, financial security, and peace of mind to both policyholders and their loved ones. Whether you are a young professional starting a family or a seasoned individual planning for the future, understanding the various types of life insurance and their benefits is essential. By incorporating life insurance into your financial strategy, you can build a solid foundation for the well-being of your family and loved ones, ensuring they are taken care of even when you are no longer there to provide for them.
Do you Understand the difference between Pre-claim and Post-claim Underwriting?
To understand post-claim underwriting, you must first understand how insurance companies operate. Insurance companies operate in the realm of risk, not simply because they insure against risky situations like driving, but because they are taking a risk that they may lose money by having to pay a large sum if a claim is filed.
Recognizing the risk of potential claim payouts is an important step in the insurance company’s decision to provide coverage. To recognize this risk, insurance companies engage in what is known as underwriting.
Post-claim underwriting is a process in which your actual eligibility for coverage is not determined at the initial stages when you submit your application and instead is reviewed only when your love ones needs to make a claim. Which means that your eligibility for a claim will only be ascertained after your death, when your family makes a claim on their policy. This eligibility assessment may happen years after paying the premiums and there are no guarantees for coverage.
Pre-claim underwriting is a thorough process done at the time of the insurance application to determine your eligibility from the outset. Your insurance broker can go through each of the required elements of an insurance application to ensure that you are properly and legally representing your physical and financial status. Once you have been approved for a pre-claim underwritten policy, your coverage is guaranteed.
One of my relative was denied benefit; Why I should buy Life Insurance?
Any Life insurance company in Canada associated Assuris are considered to be a legitimate Insurance Company in Canada.
If you are a Canadian citizen or resident and, you purchased a product from a member company in Canada, you are protected by Assuris.
That is why you need to discuss with a Licensed Advisor to learn about the Life Insurance products.
If you purchase the wrong insurance plan for you, there could be clause that can deny you the death benefit.
In most cases the death benefit is denied just because the client did not understand the clause and lied on the application.
For example when Post-claim underwriting happens, just as it says, after the claim. The insurance company only goes through the underwriting process after a claim is made. Any inconsistency found between the records and the forms used to apply for the coverage could make the claim invalid.
Contact us to Learn about how a Life Insurance can protect your income and find out the best option for you.
