Life insurance is one of the best ways to build a secure future for yourself and your family. By getting a plan under your name, you start saving money in terms of premium with an insurance company, which can be withdrawn at any point in time.
In addition, if you pass away within the time, your family automatically becomes liable for claiming the policy upon which they will be handed over with the promised amount. A life insurance policy works great for people who are unable to save for their future.
However, the questions arises here, how does life insurance technically and practically work? For how long do you have to pay the premiums? In addition, what if you pay the premium in full, will the insurance b still be active? Which insurance is the best to buy? Where can you buy insurance?
The Two Type of Premium Pay Ups
Before you finalize a policy in your name, it is advisable to discuss the premium paying options with a professional so you do not struggle with the payments later. Here are the two basic types of premium pay up:
1. Paying within Predetermined Schedule
A policy following a predetermined paying schedule allows you to clear your premiums within the decided time frame. Even if you clear the premium on cash up front, the insurance will be still in effect unless you die or decide to withdraw the cumulative amount.
2. Reduced Pay Up
When the insurance policy owner decided to opt for the reduced pay-up schedule, the death benefit will be lower and will remain in effect unless you pass away or withdraw the cash.
Paying in Full Premiums
Although buying life insurance itself is not difficult people are most likely to get confused about the payment schedules. What will happen if you pay the premiums early or in full?
When you have enough money to buy the insurance and pay the premium in full, you certainly should avail of the offer as it saves you the hassle of paying monthly premiums that can at times become a struggle.
Having said that, what most individuals are concerned about is what will happen if they pay the premium in full? Will the insurance company forget about their policy or will it expire in the coming years?
Nothing of this sort ever happens! Irrespective of your payment schedule, the terms of a life insurance policy remain the same. If you have opted for the whole life insurance policy, it will be in effect until the day you die or decide to withdraw the cash.
The only benefit that you gain from paying premiums upfront is that you will be saved from the hassle of the monthly charges or else, for some, the monthly payment schedule is a lifesaver!
Once you buy life insurance, the terms that you signed up for never change, and hence, your payment schedule never affects it.
When is a Life Insurance Policy Terminated?
What concerns most people about a life insurance plan is its termination. How and when does it terminate? Do you terminate it as a holder or does the company does it themselves? Either way, what will happen if the plan is terminated?
If you talk on the owner’s behalf, when you are dissatisfied with the policy, you can terminate it at any point in time. Thus, the reasons for dissatisfaction may include increased premiums, changes in policies, or benefits whatsoever. Hence, you as the owner have the complete right to terminate.
On the contrary, the insurance company is too liable to terminate your policy at any given time based on overdue premiums. Of course, before the company terminates the policy, they will notify you of the decision and only then put it into effect.
What happens if you decide to terminate the whole life insurance plan? It depends on the company and its policy. Generally, you do not get the paid premiums back in full. The company may hold back some cash value from the plan and return the rest but it all depends on the policies.
Remember, to be on the safe side, always do your research to find the most reliable insurance company with flexible terms so you do not find it hard to continue or discontinue the insurance plan later.
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