The Benefits of Life Insurance

Life insurance is a contract between the policyappoint a new beneficiary without the consent of
owner and the insurance company, where thethe current beneficiary.
company agrees to pay a sum of money uponThere are a few different types of life insurance.
the occurrence of the death of the insured. InFor our purposes here, we are only going to
return, the policy owner agrees to make regularmake a distinction between those types of
premium payments.policies that provide you with money while you
Insured events that may be covered include:are still living and those that do not because we
death, diagnosis of a terminal illness, diagnosis of awant to hold our focus on the benefits of life
critical illness, disability due to ill health, permanentinsurance, not the different types of coverage.
disability, accidental death, or requirement for longTerm life insurance does not give you the
term care.potential for income while you are still living. It only
Not only can life insurance benefit your family inpays a benefit in the event you die during the
the event of your death, but it can also benefitcovered term. Other types of coverage, such as
you as an investment. Your life insurance canvariable life, universal life, and whole life, do have a
provide benefits to your children, emergencycash surrender value because a portion of each
loans to you while you are still alive, and somepremium payment you make is invested in a
other benefits as well. For the remainder of thisseparate account. That money can accrue over
article, we will outline each of the benefits availabletime, depending upon what the money is being
to you and your family under a typical lifeinvested in. You have the option of investing the
insurance policy so that you can decide if lifemoney in fixed income or variable investment
insurance might be right for you, or if you needfunds.
to make changes to your already existing lifeYou can terminate your policy while you are still
insurance policy.alive. If you choose to do, you will receive the
The most well known feature of a life insuranceamount that has been invested, minus the
contract is the designation of a beneficiary. In thesurrender charges that the insurance company will
event of your death, benefits can be distributedassess on the money for early withdrawal.
to one or more beneficiaries of your choosing.You can also take a loan against the cash value of
There are many different types of beneficiariesyour policy. The interest rates for these types of
that you can establish, so we need to reviewloans are typically small, and you can pay back
each one and weigh the pros and cons of each.the loan in a lump sum or installments. If you
You can specify multiple beneficiaries if youdefault on the loan, the insurance company will
choose to do so. For example, you might want topay off the loan using the accumulated cash value
have your spouse as well as all of your childrenthat you borrowed against.
listed as beneficiaries. You can also stipulate theAlso, it is possible to buy a participating policy. The
percentage of the proceeds that each beneficiaryinsurance company pays the holder of a
is to receive. Most people list their wife as theparticipating policy a dividend, much like a normal
sole beneficiary while the kids are still young, andcorporation pays dividends to its stockholders. A
then as the kids get older, they modify theirnon-participating policy does not pay a dividend.
policy to include their children for a certainTerm life policies are always non-participating.
percentage of the death benefit. A guardian orI hope this information will help you weigh all your
trustee needs to be appointed to administer theoptions when you decide to buy a life insurance
payout of the proceeds to any beneficiaries thatpolicy. If you already have a policy, review it
are still a minor.carefully to make sure you have a policy that
It is also common to name a contingentsuits your needs. Call your agent and ask
beneficiary. If your primary beneficiary dies, thenquestions if there is something that is not clear.
the contingent beneficiary is next in line to receiveYou may not have an individual agent assigned to
the proceeds of your life insurance when you die.your policy. If that is the case, call the customer
Also, your beneficiary designation can beservice center for the insurance company, and
revocable or irrevocable. If it is revocable, youthey will be able to answer any questions you
can change it any time without permission to domight have.
so. If the designation is irrevocable, you can not