What is Whole Life Insurance Coverage and Insurance Premiums?
Insurance is a simple concept that can be understood by anyone as long as they have a small imagination. For example, assume your whole life insurance coverage is your piggy bank or the jar you collect coins in. the premium is the coins that you will use and the policy is the total amount of coins that you will get once the jar or piggy bank is full. Having this in mind, you can easily get an understanding of how the premiums work.
The premiums, coins in your case, will have to be inserted in the piggy bank regularly for a period of time. The same case will apply for your whole life insurance. You will have to pay your premiums regularly for a period of time.
In the piggy bank scenario, the period of time is not fixed as it will be determined by the amount of coins you get in a day, week and month. The capacity of the bank will also determine the number of coins you will need in order for it to be full. This is the same principle that will apply for your insurance cover.
The amount of compensation that you want from your life insurance coverage will determine the amount of premium that you would be required to pay. The amount of premium that you decide to choose will determine the duration that you will be paying the premiums. The regularity of your premium payments will also determine how soon your whole life insurance policy will mature. Just like the piggy bank scenario, you will have to decide how you want the premiums to affect your policy. However, there are some things that the piggy bank scenario will not be able to be compared to.
One of the main things that you cannot be able to use the piggy bank scenario to fully compare with your whole life insurance cover is the default of payments. Defaulting payments might have minor or major repercussions. The nature of the default and the terms and conditions of the insurance policy will determine the overall outcome. In some cases a default of premium payments is normally given with a fine. However, if the default is major, one tends to pay a steep fine and in some cases they may loose the entire policy. This being the case, people are always advised to make sure that their premium payments are made on time.
If you happen to foresee a failure in premium payments you can do two things to avoid loss of the policy. You can talk to the insurance company to have an easier payment method. Most of them are reasonable and they will listen to you. If they do not listen, you can decide to cash in your whole life insurance leads policy early and avoid losing all the money that you had paid as premiums.