FAMILY LIFE INSURANCE

Family Life Insurance is a category of insurance Policy. And it is a contract where an insurer, in exchange for a premium payable by the Policyholder, guarantees payment of death benefits to the Latter’s beneficiaries upon his death.

The primary function of family life insurance policy is to make provision for a financial benefit to dependents of the Policyholder upon death. The insurance company pays a certain amount called “death benefit” to certain beneficiary (ies), when the policyholder dies.

This death benefit will reduce the financial burden associated with settling the dead policyholder’s affairs, including funeral costs, debt payments etc. It can also help to provide his beneficiaries access to money when they need it after his death.

MEANING OF FAMILY LIFE INSURANCE

Family life insurance is a type of life insurance policy that covers any financial burden that arises as a result  of family member’s death.  This life insurance policy is very important especially when the breadwinner of the family dies. In the case of a parent or another provider, family life insurance will help complement their income and cover family expenses. In the case of a child however, family life insurance will help to cover funeral costs and other end-of-life expenses of such a child.

 Family life insurance encapsulates the many life insurance policies that can cover your entire family. In order words, it does not define a specific insurance policy contrary to what the name implies, it is contrary to what the name implies. For instance, some insurers use the term ‘family life insurance’ to connote that ‘‘they have something for everyone in your family.’’

Family life insurance is necessary for anyone in your family whose death would create a financial burden. This could emanate from loss of income originally coming from them or the debt arising from their funeral expenses.

How family life insurance works

Family life insurance operates in different forms depending on the insurance company in question. While some insurance companies offer family life that affords coverage to the whole family, which may be a “term” or “whole” life insurance policies covering parents with smaller policies to cover only funeral expenses for other family members. Other insurance companies create family life insurance using riders on a primary policy. Riders are additional benefits that can be bought and included in the basic life insurance policy. To create a rider to the original policy means to pay extra or additional premium.

 Some other insurance companies offer a term rider which permits the policyholder to add life insurance to his spouse’s already existing term or whole life insurance policy. Many others also offer children’s term rider, which provides a small coverage for children. And often terminating when they grow to a certain age.

In insurance policy, you are at liberty to buy one or more policies. This is because, one may not give you and your entire family enough coverage.

Benefits

Some prospective policyholders would want to know the benefits of subscribing to family life insurance policy. Below are some of the benefits.

Family life it makes provision for financial security for its beneficiaries.

It makes provision for spreading of risks. This is of course, the basic principle behind insurance. That  is to spread risks among a large number of people

Life insurance encourages Savings.

It equally helps to encourages international trade

Types of family life insurance

They are different types of family life insurance available and they are:

Term family life insurance policy

Whole or permanent family life insurance policy

Term life insurance

This is a class of life insurance policy that covers you for a specific period of time. For instance, it could be for a period of ten or twenty years. Generally, it is advisable to purchase term life insurance at a younger age.

In term life insurance policy, the beneficiaries can only receive death benefits if the policyholder dies within that term of years in the policy. In other words, if the policyholder survives the term of the policy, he will have to either buy a new policy, which is usually more expensive than the previous one because of advancement in age or forget about life insurance.

Similarly, you may choose to buy separate term family life policies for each family member. Also, Term life insurance has the advantage of being the most affordable life insurance policy. And children policies can even be cheaper. This is to the extent that Depending on the ages and health status of your family, insuring the life of your entire family for several decades may be less than $100 per month.

The appropriate time to purchase a term life insurance policy is when you envisage having dependents. And it is advisable that the term of the policy you buy should cover as long as you believe your dependents will need your financial provision

 Permanent Life Insurance

In contrast to term life insurance which only lasts for a set number of years, permanent life insurance policy lasts for your entire life. However, you must be consistent with the payment of your premiums.

In Permanent life insurance, there is equally a provision for payment of death benefits just like term life insurance policy. But additionally, it also has a cash value component. That means that a percentage of your monthly premiums go into an account, which will be yielding.

Types of Permanent Life Insurance

There are several types of permanent life insurance, including;

Whole or ordinary life insurance

Universal or adjustable life insurance

Universal- variable life insurance

Whole or ordinary life insurance

This is the most common type of permanent life insurance policy. It provides savings account as well as death benefits.

 This is a class of life insurance policy that is advisable to get if you have reasonable financial obligations that are not time bound. For instance, if you have assets that your dependants would need to pay estate taxes upon your death, then it is advisable that you purchase a permanent life insurance policy that will cover those taxes. However, the benefits needs time to grow, and as such, it is best to start early enough.

Whole life insurance policy makes available consistent premiums as well as cash value accumulation. It is guaranteed to remain in force through the holder’s lifetime provided the required premiums are paid. And just like other forms of life insurance policy, it is highly advisable to purchase whole life insurance policy at a very young age so as to take advantage of low and cheap premiums.

Universal or adjustable life insurance

This type is more flexible than the whole life insurance policy. Its cash value account typically earns a money market rate of interest. With the accumulation of money in your account, you will have the choice of altering your premiums payment provided you have money in your account to cover the costs. The advantage of this is that you will be able to pay your premiums even if you have a bad economic situation- from your savings.

Variable whole life insurance

This provides for the investment of its cash value in specific mutual funds which may either gain or lose value depending on the performance of the investments. The policyholders participate in the long term gains of the investments.

However, the possibility of losing more is high especially when those investments perform poorly. Thus those policies can lapse if the value of the investments drop badly and they maybe necessity of putting large amount of cash to keep the policy active or let it lapse. It in the events it lapses, it cancels the entire policy together with the accruable death benefits

Universal-variable life insurance

This type of permanent life insurance policy combines the attributes of universal and variable term life insurance policies. That is to say, you have the ability to modify your premiums and death benefits common with universal life insurance as well as the investment risks and rewards associated with variable life insurance policy

Conclusion

It is advised that you endeavor to buy family life insurance policy. The cost of family life insurance depends on many factors, including the type of insurance policy you choose. It also includes the number of family members the policy will cover policy and the amount of coverage you buy.