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Life Insurance - What You Don't Know

Does Life Insurance Only Pay When You Die?

Life insurance, in any form, is purchased as protection against the unexpected. There are always questions about life insurance, but it can be an uneasy process to get some of the answers. One of the most common questions about life insurance involves the way that policies distribute funds. Does life insurance only pay out when you die? Who can a life insurance pay money to? These are legitimate questions that deserve straightforward answers.

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Term Life Insurance
Term life insurance is a very inexpensive way to protect your loved ones against financial disaster. For example, if you purchase a home then you probably took out a 30-year mortgage to pay for it. What happens to your family if you suddenly die 10 years into the mortgage? Without term life insurance, the family home could be lost. With term life insurance, the family home could be saved.

Term life insurance only pays out to the beneficiary upon the death of the insured. That means that your family would be protected if something were to happen to you, which is what insurance is designed to do.

Whole Life Insurance
Whole life insurance is very different from term life insurance in that it offers a long list of protections that term life does not offer. Whole life has an investment portion to it that allows you to build up a cash value for your family. Upon your death, your family would receive your death benefit and the cash value that has built up in your policy. This is an excellent way to protect your personal assets while you are alive and make sure that your family gets those assets when you pass away.

The insured can cash in a whole life insurance policy and get a large portion of the cash value. The insured can also take out loans against the death benefit of a whole life policy and use that money for whatever they would like. It is important to remember that any part of that loan that is not paid back by the time the insured passes away is deducted from the death benefit.

Workers’ Life Insurance Policy
If you’re a worker in Nigeria, whether in the public or private sector, you are already (or should be) under a life insurance policy by induction. The Pension Reform Act (PRA 2004) specified that, “employers shall maintain life insurance policy in favour of the employee for a minimum of three times the annual total emolument of the employee.”

With the provision above, an employer is expected to arrange a minimum of three times the annual emolument for the employee with a licensed life insurance company. This amount is payable in the case of death of the employee while the employee is still in the service of the employer.

You Have Insurance Options
If you want an inexpensive way of protecting your family's financial well-being if you should suddenly pass away, then term life insurance is the answer. When you pass away, your family would get the death benefit.

If you want to build up an estate and have a life insurance policy that offers you financial options as well as paying out a death benefit to your family when you pass away, then you should invest in whole life insurance.
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