Life Insurance FAQ
What is life insurance?
Life insurance is a contract between the policy holder and the insurance company where the insurer agrees to pay a sum of money to the beneficiary of the policy when the person who is insured dies. In return, the policy owner pays a premium to the insurance company at regular intervals.
Can anyone be the beneficiary of my life insurance policy?
Yes, you can name anyone or any organization, such as a charity, to be the beneficiary of your life insurance policy.
What does the beneficiary get when I die?
The beneficiary will receive the stipulated sum of money when you die, provided that your death meets the contract criteria outlined in your policy.
Can my life insurance policy be deemed void?
Yes, it can. Your policy will have stipulations and criteria outlined in your contract. For example, suicide is often one of the criteria that will nullify your life insurance policy.
Are there other insured events other than death?
Yes, life insurance events can include diagnosis of a terminal or critical illness, disability due to health, permanent disability, accidental death or the need for long term care, to name a few.
What are the two different types of life insurance categories?
Protection policies that provide a benefit for a specific event, usually in a lump sum payment, and investment policies where the objective is to grow capital on regular or single premiums.
Can the insured and the policy holder be different people?
Yes, although most often the insured and the policy holder are the same people. However, if you take a life insurance policy out on your husband or wife, you are the policy holder and they are the insured.
Can I change the beneficiary on my life insurance?
Yes, you can easily change the beneficiary on your life insurance at any time by contacting the insurer and letting them know, unless the policy has an irrevocable beneficiary designation, which is uncommon.
What are the basic classes of life insurance?
There are two classes of life insurance, temporary and permanent.
What are the subclasses of life insurance under temporary and permanent life insurance?
The subclasses are term, universal, whole life, variable, variable universal and endowment life insurance.
What is term life insurance?
Term life insurance is insurance for a specific period of time and a specific premium.
What is permanent life insurance?
This policy remains in force until the policy pays out, unless it is voided, such as when the owner fails to pay the premium.
What is whole life insurance?
Whole life insurance provides insurance for a stable premium and a cash value table that is guaranteed in the policy by the company. You can take out policy loans on a whole life insurance policy.
What is universal life insurance?
Universal life insurance is a policy that provides permanent life insurance with flexible premium payments and a higher rate of return, which includes a cash account that you can draw from.
What is endowment life insurance?
Endowment life insurance is a policy with the cash value of the policy equaling the death benefit.