What is in an insurance policy
Life Insurance and it’s overview
I want to start off this 2010 with an article regarding Life Insurance. Many people find this topic
morbid but believe me when I say this contract is as important as a Will and should be taken just
as seriously as health insurance. Due to the length in details of this article I have provided
chapters for easy reading. I hope this will educate you on Life Insurance and the importance of
its necessity. (Note: For better understanding "You" is the policy owner and the insured)
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Life Insurance – what it is
Life Insurance is an insurance product that pays at the death of the insured. It really should be
called "Death Insurance," but people don't like that name. But it insures the death of an
individual. Actually, what is insured is the economic loss that would occur at the death of the
person insured.
Those economic losses take a lot of different forms, such as:
- the income stream of either "breadwinner" in a family
- the loss of services to the family of a stay-at-home-mom
- the final expenses at the death of a child
- final expenses of an individual after an illness and medical treatment
- "Keyman" coverage, which insures the owner or valuable employee of a business against the
economic loss the business would suffer at their death
- estate planning insurance, where a person is insured to pay estate taxes at death
- "Buy and Sell Agreements," in which life insurance is purchased to fund a business transaction
at the untimely death of parties in the transaction
- Accidental death insurance, in which a person buys a policy that pays in case they die due to
an accident
- Mortgage life insurance, in which the borrower buys a policy that pays off the mortgage at
death - and many more.
Different story of Life Insurance Policies
Many people own life insurance, but let's face it. It's probably not a purchase that most people
brag about to their friends like they might if they had just purchased a new Corvette, but they
made the purchase anyway because they love their families and want their family to carry on
living their current lifestyle in the event of the primary breadwinner's untimely death. While this
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article doesn't apply to people who own term insurance, those who bought permanent life
insurance, which is life insurance with an additional savings component, will find this information
very important.
To understand the problem, I will first give you a brief primer on life insurance, and then explain
how something that seems like a sure bet can go so wrong. Life insurance can be separated in
to two basic types, term and permanent life insurance. With term insurance a person pays a
certain amount of money, called a premium, for a period of time, from one year up to 30 years.
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What is in an insurance policy |
