A life insurance is a financial product that involves three parties. The first is the insurance provider, the second is the person insured, and the third is the beneficiary. The person insured pays the premiums to the insurance provider, so that a lump sum is paid to the beneficiary in the unfortunate event of the death of the person insured. There are many variations to this basic theme of life insurance.



The insured person can opt for whole life insurance, term life insurance, or endowment insurance. In term insurance the person is insured for a fixed term, namely, 15 or 20 years. It is assumed that after this period the person will not need life insurance as other factors takeover. One could be a reduced number of dependents. The other could be substantial retirement savings.

The insurance provider gives an approximate amount as the premium for a person of a certain age wanting to take a term insurance for a certain period. These are called term life insurance quotes. After testing the person's health and getting in variables such as family health history, these quotes are modified and final term life insurance rates are arrived at.

Naturally, the policyholder has to say yes to the medical check up considered mandatory by many companies. This makes sure that the buyer is not down with some fatal ailment. He is also questioned regarding his smoking habit as even this can control the number of years he lives for.

You have two options when it comes to paying the premiums or rates. One is the fixed annual premium option, where you pay the same sum each year. The other is the variable premium option, where you pay a steadily increasing sum each year. Though the former is more expensive initially, it is cheaper in the long run. However, if you are tight for cash now, but expect better inflows later, opt for the latter scheme.

Also, be sure you pay your premiums strictly on time. A delay would mean a lapse in validity of the policy and if in this period you meet with untimely death, your beneficiary is left high and dry. Though the policy can be renewed by payment of a small penalty, it would end up going against the main principle of life insurance.

One more point that must be borne in mind is how to choose a good insurance company. It is not true that the one which is charging you the least sum is the best. It is necessary that the company you choose does not shut down in your lifetime itself – no, for it to be any good it has to outlive you. Hence choose the insurance company you feel is financially on a sound footing.

This becomes important if you have decided to let your beneficiary be paid an annuity instead of the entire fortune at the moment of your death. Before you decide on the mode of payment, talk the thing over with your beneficiary.

Now comes the question of how much you should insure yourself for. This can be calculated with the help of various online calculators. They take into consideration things such as your funeral expenses, a readjustment fund, baby sitting expenses, your debts, your mortgages, college tuition fees, a retirement fund for your spouse, especially if they are a home maker.

The premium paid depends on the amount calculated, age and health of the buyer and the length of the term for which coverage is needed.

Insurance policy ought to be bought when the person is young in age, but he need not go for it if he has no dependents.

One more way of cost-cutting is by using the internet for the purpose of getting term life insurance quotes. Online rates involve less overhead charges and hence the company can afford to reduce them as compared to offline ones. People who are short on time have no option but to go for life insurance no exam policies which are inherently expensive. Hence, to lower the rates, take time out for the mandatory health check up by the insurance company.

If all the above mentioned plans have been taken into consideration then you shall surely have an affordable life insurance policy and shall be involved with a sound insurance company as well.