A life insurance policy is a contract between a policyholder and an insurance carrier. Most life insurance policies have the following parts:
• Premium payments – What the insured gives to the insurance carrier. The premium can be paid monthly, quarterly, semiannually or annual depends on the carrier. The premium is based on the age, medical conditions and number of years to be insured.
• Death benefit – The among of money the insurance carrier pays to beneficiaries upon the insured’s death according to the terms of the contract.
• Cash value – An interest-bearing savings or investment value that’s included in whole life insurance policies only.
• Term period – How long the policy provides coverage for the individual. The individual will have to decide first on choosing a term for a set number of years or whole life policy.
• Beneficiaries: A beneficiary could be a person or entity such as not for profit organization like a church you name to receive your death benefit. Beneficiaries are often spouses, children, and other family members, but you can name a friend or even a charity. An individual can name more than one beneficiary, and the beneficiary can be changed anytime by the owner of the policy.