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How does permanent life insurance work?

Friday, September 30th, 2011

Today, the number of people intending to secure their lives by purchasing an adequate life insurance policy is increasing. The need to purchase a life insurance cover does not indicate that you must compromise either on the premium rates or benefits. Here a few good pointers that will educate you on the working of your permanent life insurance cover.

You must ensure that you have the copy of the original application of the policy. You must have the adequate and relevant proof to support your beliefs about the policy, in case any written error or misstated conditions have been mentioned in your policy document. Since any error after the policy has been issued cannot be rectified, only an amendment with the assistance of your duplicate copy of the application.

In addition to managing expenses of a funeral, permanent life insurance today is utilized for several other purposes like paying for education or clearing off home mortgage, starting a business, or a simple savings plan. The insured individual is not limited to use their life insurance policy.

Incontestability in the policy term prevents the insurer from rejecting any claims, once the policy has been issued. If the policyholder dies within the initial two years of the policy term, and any false statement is found in the application, the insurance vendor can deny the payment of the claim. However, if the insurer expires after the first two years of the policy, the insurance company is completely liable to provide coverage for the bereaved family, irrespective of the terms mentioned in the application.

Being honest with your age helps! Contrary to the belief, your false age will not get you cheaper rates on your insurance premium. However, if you are in fact younger, then you will avail bargained rates. If a claim is made and the true age needs to be rectified, the adjustments will be extracted from the beneficiary’s proceeds.

Certain liabilities will not be covered by the insurer, and are mentioned in the fine print under the policy terms and conditions. These liabilities are explained to the application holder before the supplication is signed. Military personnel, individuals who fly aircraft, and people working in hazardous occupations are restricted from receiving certain benefits.

The profits of the policy are paid through various settlement options. Usually, the insurance company pays lump sum to the insured or the beneficiary. Other options include fixed-period of instalments, income for life, interest only payments or fixed amount of instalments. You must inquire from your agent which of the above-mentioned choices will fit your bill.


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