Life insurance in the US: basic concepts
It is impossible to imagine life in the USA without insuring. Here people got used to insuring everything – from a car, a flat, and other property to own life or even separate parts of the body. Medical insurance is mandatory for Americans and permanent residents. If there is no policy, the person can face a fine.
Life insurance is a way to maintain a family
Some Americans decide to take additional life insurance. Contrary to popular belief, this service is relevant not so much for the elderly as for young capable people. Registration of such a policy is a kind of care for relatives and friends in case of unforeseen circumstances. The service is extremely important for those who bring the greatest income to the family. Thus, the person on whom the financial situation of the whole family depends helps it to exist. I.e. the policy is drawn up so that in the event of the loss of the breadwinner, the family is not left without a livelihood.
The younger the person, the easier it is for him to get life insurance. But, elderly people who fall into a high-risk group can also insure their lives. They will have to pay much more, though. Frequently, Americans have life insurance around the age of 50. In this case, they act from the same considerations: to provide for the family even after their death. After all, then the right to this money passes to their heirs. The remaining spouse, children, or other relatives will be considered heirs. From the money received, they will be able to continue to pay off existing debts, pay taxes or continue the business.
A family that has lost a breadwinner is also entitled to insurance payments from the employer. However, a family should not rely on this too much. There are three main reasons for this:
- This sum is not very big. It varies from $10,000 to the size of the deceased’s annual income.
- This sum is paid out only once. I.e. this money is only enough to cover the family’s expenses for a maximum of a year.
- Some employers pay out the insurance only if their employee passed away being in the workplace.
Life insurance offers a wide range of insurance and investment services. It allows a person to solve a whole range of social-economic problems.
Types of life insurance contracts
There are several types of life insurance contracts in the United States.
- Standard life insurance stipulates the payment of the insurance premium throughout the entire life of the insured person;
- Life insurance, limited for a period, provides for the payment of the insurance premium over a certain period in parts or in the form of a lump-sum payment of the entire required amount. Afterward, the insurance policy is considered paid. The amount specified in the insurance contract is paid in a lump sum in the event of the death of the insured person;
- Insurance, providing for the payment of the entire sum insured upon expiry of the number of years specified in the policy or in the event of the death of the insured person;
- Conditional death insurance only for a certain short period of time (usually for several years). A typical insurance example is the life insurance of the debtor for the duration of the loan;
- The most popular type of life insurance is universal insurance. Its essence lies in the fact that the amount of annual payments is determined independently by the person who takes out the insurance.
Now life insurance is a strategically principled industry that provides investment in the economy and solving social problems of society. Life insurance has long become more than just an inventory, thanks to which people can accumulate their funds.