About Life Insurance Policies

Effects

Most people use life insurance to protect their family.
Learn about the use of a life insurance policy. A life insurance policy is a contract between you and the insurance company. You tell them the truth on all the questions and pay premiums, and they give your beneficiary money when you die. Many people use life insurance as a method of charitable giving even after death. Most use it to protect their family against loss if you have a premature death.

The first page of the policy shows whether the insured received smokers' rates.
Check out the first page of the contract that shows the policy specifications. It contains information about the person insured, the amount of insurance, the date of issue, the coverage type and the premium. It also shows whether there was special pricing, such as for a smoker. If the policy charges premiums, that information is here too.

The middle of the policy contains the nonforfeiture provisions.
Flip through the middle section of the life insurance policy and you'll notice various items. Often they start with a table of rates and definitions so the reader has an understanding of the terms. It lists whether a policy has a grace period, which is an extension of the time to make a premium payment, the rights of the owner and non-forfeiture provisions if it has cash value. These provisions are in permanent plans. The interior also tells about the right to borrow from a policy if it has cash value and the amount of interest you pay.

Accelerated death benefits give money to the insured before he dies.
See that companies can't question the policy after two years in the section labeled "Incontestability". Near that section, most insurance companies also mention that the death benefit for a named beneficiary isn't subject to seizure by the insured's creditors. Companies have a terminal illness rider or accelerated death benefit. This rider offers the insured an opportunity to take some of the death benefit if they have a terminal illness with a life expectancy of a year or less.

After they issue the policy, you can name anyone the beneficiary, even your cat.
Understand that you can change your beneficiary. In order to be a beneficiary, the person must have an insurable interest. After you receive the policy, you can change the beneficiary to anyone you want. You also can sell your policy to someone and still remain the insured. This used to happen before the accelerated death benefit came to existence. The purchaser paid a lot less than the face value, became the owner, made herself the beneficiary and hoped to get a good return on the money when the insured died. This gruesome market referred to the policies as viaticals.

Don't worry; you have to sign if you're insured.
Remember that nobody can take a policy out without your knowledge. You have to sign somewhere. Large amounts also require physicals and often urine and blood samples. After the contestability period of two years passes, the company pays claims for suicide.