There Are Three Parties To A Life Insurance Contract

Life insurance is a means for providing financial protection for your family in the event of your death.

You agree to pay a premium at regular intervals, and the insurance company agrees to pay a certain sum of money to your beneficiary upon your death. A life insurance contract is relatively straightforward. There are three parties to a life insurance contract. This is the person whose life is being insured under the policy. First, there is the insured. Next, there is the insurer.

And third, there is the owner. The insurer is the insurance company who underwrites the risk. The owner and insured are not necessarily one and the same. The person who buys the policy is the owner, and the person whose life the policy is based on is the insured. Someone can buy a life insurance policy to insure the life of someone else, such as their spouse. When the owner and the insured are different people, premium payments are the responsibility of the owner.

This is the person who receives the proceeds from the policy in the event of the death of the insured, and is assigned by the owner. Every life insurance contract also has a beneficiary. There are two types. If it is revocable, the owner can change it at any time. An irrevocable beneficiary can not be changed unless the beneficiary gives his or her permission. The policy is subject to certain terms and conditions. But with almost every policy, death as the result of suicide during the first two years of the policy term is excluded from coverage.

There are usually certain exclusions that apply, depending on the person being insured. Also, during the first two years of the policy, often referred to as the contestable period, the insurance company retains the right to not immediately pay out, even if the death is caused by a condition that is covered in the policy. The amount paid to the beneficiary is called the face amount. The company can order an investigation into the death of the insured, to make sure that the death was not deliberate or the result of homicide. The maturity date is reached upon either the date when the insured deceases or reaches a certain age. Regardless of the reason for buying the insurance, the owner( if not the same person as the insured) , must have an insurable interest. Life insurance is most often used to provide income protection to the spouse of the deceased.

In other words, the owner of the contract must have a reason for wanting to insure the life of that person, otherwise the contract is void. A notarized death certificate is the most commonly accepted form of proof. When the person covered by the policy dies, the insurance company requires proof of death before paying the claim. The benefit is paid out either as a lump sum or as an annuity that is paid out over time. It is possible for the beneficiary to set up a lifetime annuity, which would guarantee that person a certain amount of monthly income for the rest of his or her life. Any annuity can be a good way to receive the benefits. There are two basic types of life insurance, temporary and permanent.

An example of a term policy would be a 20- year term life, which means that the policy will pay a death benefit if the person dies within the next twenty years. Temporary insurance is known as term life. Permanent insurance includes whole life and universal life. Universal insurance is somewhat complicated. Whole life provides for a payout no matter when the person dies, but premiums have to continue to be paid, usually right up until the insured reaches the age of 10Universal policies are somewhat similar, but they allow for greater premium flexibility. You should talk to an agent before buying it. You should sit down with your spouse and talk about buying a policy.

I hope this information has helped you become acquainted with life insurance. Then, call an agent who works for an insurance company with a strong financial rating and make an appointment to discuss your objectives. Use the information that was presented here to help you make intelligent choices so your family will be protected in the event that something happens to you.