Why Take A Life Insurance Policy Out?
Life insurance is designed to pay a sum of money to a beneficiary in the event of the death of an insured person. Life insurance can only be marketed and sold by what is called a legal reserve life insurance company. The beneficiary must have an insurable in the insured, meaning that the beneficiary must have more to gain by the person living than by the insured dying.
The primary reason for life insurance is to replace lost income from the future income stream of an insured that would be lost should the insured die.
So for a family with children, the death of the bread winning husband, and of the wife, if she is also earning money, life insurance could replace the future income that would be lost in case of a death. People have to be in good health in order to purchase life insurance, and they can either be rated as far as the premium is concerned or declined if the health situation is too severe. That’s why it is very important to take a life insurance an early age.
Once life insurance is issued, it cannot be cancelled by the insurance company, unless there was fraud by the insured when purchasing the policy in regard to the health of the insured. There is a period of time from the date of the policy’s approval of two years where the insurance company has the contractual right to rescind the policy in case of fraud, and after that they cannot.
There is also a two year suicide clause, where the policy will not pay if the insured commits suicide within two years. From the standpoint of the consumer, life insurance is a good deal, as there are various types of policies designed to fit any budget. Term life insurance is temporary coverage that covers a person for a limited period of time, such as 10, 15, 20 or 30 years. After that period of time the coverage ceases to exist.
Permanent life insurance covers a person until life expectancy, such as age 100. If a person reaches that age, the policy endows for the face amount of the policy. A permanent policy has a cash value that grows each year, which the insured can borrow from and any debt that is outstanding is deducted from the death benefit. Term insurance is much cheaper, as it is temporary. Many times term and permanent are combined together in order to design a program that fits individual needs.