All You Have to Know About Life Insurance – Meaning, Types and Benefits

Meaning of Life Insurance

The objective behind procuring a life insurance policy is to guarantee the proper care of your dependents in the unfortunate event of your passing. While only a minority of individuals in this nation possess this awareness, it is of utmost importance that as a parent, a civil servant, or a business owner, you consider acquiring a life insurance policy. Doing so is crucial to safeguarding the financial well-being of your family and loved ones.

There are many reason why this is important. When thinking about your children welfare most especially college or university fee, settlement or establishing your children, life insurance can ensure that this plans are met in the event of your death

How Life Insurance Works

On the death of the policyholder, a lump sum or a regular payment are made to the nominee of the policyholder.

The total money paid out is dependent on the amount of coverage you bought. Hence, the higher the premium the higher the payout

Types of Life Insurance

There are different types of life insurance, but for the sake of this study, we will consider just three (3) important life insurance that is beneficial in Nigerian:

1 Term Life Insurance

Term life insurance offers protection for a predetermined period of time, typically 10, 20, or even 30 years. If the policyholder passes away within the policy’s term, the death benefit is paid to the designated beneficiary. In other words, no claim will be made if the policyholder survives death while the policy is in effect.

2 Whole Life insurance

This offers lifelong coverage and includes a savings component called cash value. Part of the premium goes into the cash value, which automatically grows over time and can be withdrawn or borrowed against. This kind of insurance gives a lifelong protection to the family against financial instability

3 Variable life insurance

This kind of insurance combines a death benefit with investment solution. The cash value is invested in sub-accounts, allowing the policyholder to potentially earn higher returns but as well subjecting their financial income to market risks.

Definition of Key Terms

Policyholder: This is the person to whom their life is assured by the insurance company

Death Benefit: The amount of money paid to the beneficiaries upon the death of the policyholder is called the death benefit. The beneficiaries or nominee are designated by the policyholder during the insurance application process.

Premium: This is fee paid by the policyholder typically monthly or yearly in order to keep the insurance active and running

Beneficiary/Nominee: This is the individual or organization choosing by the policyholder to withdraw the death benefit in the event of death

Riders: Policyholders can often add additional features called riders to their life insurance policies for additional benefits. Some common riders include disability income, critical illness, and accidental death.

Cash Value: some types of life insurance policies such as whole life and universal life accumulate a cash value over time which policyholders can access during their lifetime on earth through withdrawals or loans.

Documents Required for Purchasing a Life Insurance Policy

During the purchase of life insurance policy, document required for the application process can differ from company to company, however, most of the common document required by most insurance company includes:

1 Application form

This form contains a comprehensive detail about yourself, the kind of policy you are buying and other important information

2 ID card

In completion of the application, individuals are always asked to provide government-issued id card such as national identification card, voters card, passport or driver’s license.

3 Residential proof

Address proof such as utility bill or bank statement is to be provided

4 Age proof

In order to ascertain your age bracket, individual are always asked to provide birth certificate, passport or school leaving certificate

5 Financial status proof

No matter the type of insurance you are buying; Financial status proof is always requested. Proof such as income tax return, salary slip etc. are accepted

6 Medical record

This is most common document in the application process. Most insurance policies require you to undergo a total medical examination in a choosing hospital

7 Passport photograph

Your passport photograph is always needed

8 Beneficiary Details

The information of the nominee must be provided.

How Life Insurance Claim are made

Life insurance claim can be straightforward if the right process is employed. The following guideline are to be followed in other to make a claim:

1 Notify the Insurance Company: As soon as the policyholder passes away, the beneficiaries should notify the insurance company.

2 Obtain the Necessary Documents: The insurance company will provide you with a list of documents required to process the claim. typically, the document includes:

  • Original death certificate: which can be obtained from relevant authorities.
  • Policy documents: Provide the original life insurance policy documents.
  • Beneficiary identification: Submit valid identification and proof of relationship to the policyholder

3 Complete and Submit the Claim form: Normally the the insurance company will provide you with the claim form, fill and submit it through mail or through their official channel

4 reviewing and processing: upon the submission of the claim form, the insurance company will conduct investigation to review your claim. If everything pans out to be true, they will pay the death benefit and other bonuses if any

Benefits of Life Insurance

There are numerous benefits offered by life insurance to their beneficiary. Here are the core benefit of life insurance:

1 Business Continuity and progression: Planning for business succession can be greatly aided by life insurance. It offers capital to pay off a deceased partner’s share or maintain operations in the event of the absence of a vital employee.

2 Financial Protection and stability: The main advantage of life insurance is that it offers financial security and stability to your dependents and family members in the case of your untimely death. Beneficiaries who receive a death benefit can use it to maintain their standard of living, pay off debts, and cover basic living expenditures.

3 Debt payment: To ensure that your family is not left with the financial burden of unpaid debts, such as mortgages, personal loans, and credit card liabilities, life insurance can be utilized to make these payments.

4 Educational Assistance: If you have dependents or children who wish to pursue their education, life insurance may be able to offer the money they need to do so.

5 Funeral cost: Life insurance can assist in covering these costs, which might be high and unanticipated for your family at the instant of your death.

6 Alternative source of income: If you are the family’s main provider of income, life insurance makes sure that your loved ones will still be able to make ends meet following your death.





About Author
Ugodu C. Emmanuel
Content Creator and a Financial Analyst

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