How Does a Life Insurance Policy Work?

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A life insurance policy is a contract between an insurance company and an individual. Learn more about how a life insurance policy works with help from a personal finance expert and professional in this free video clip.

Part of the Video Series: Personal Finance & Life Insurance
Promoted By Zergnet

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Video Transcript

Hi, this is Walter Pardo. I'm managing director and founder of Wealth Financial Partners and WFP Tax Partners in Basking Ridge, New Jersey. Today's topic of discussion is how does the life insurance policy work. A life insurance policy is a contract between an insurance company and an individual. The individual applies for life insurance. The life insurance company takes a medical and makes sure that that individual meets certain parameters. That's called going under writing process, the underwriting process. Now based on the person's life expectancy, based on his health status, the insurance company issues a policy either a permanent policy which there is cash accumulation or a term policy that has a limited term and no cash accumulation. So what happens also is that upon issuance of this policy you have to name beneficiaries, primary beneficiaries who is going to get it if you pass away and a secondary beneficiary or contingent beneficiary which if that person is not around, who is he contingent. So all these measures have to be taking place and you could be rejected. No one is guaranteed life insurance. You have to go through an underwriting process. So there are further questions on this so without a doubt dig more to find out the details of what policy is right for you.

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