Life Insurance Claim Articles

Do You Have The Most Personally Suitable Life Insurance?

All too often I have life insurance beneficiaries come to me along the following lines: “Gosh, I was shocked to discover that there were no benefits payable to me under the deceased policyholder’s life insurance policy … what’s the deal?” Well, folks, that is sometimes not true; i.e., sometimes the insurance company is wrong and we need to remedy that. But, oftentimes, that is unfortunately true because the life insurance policy was set up as an investment mechanism with little (if any) guaranteed death benefit. This article is aimed at providing a brief overview of some of the most common life insurance products on the market and the intent of same, so that you are not someday surprised to learn that a lump sum death benefit is unavailable.

The two broad classes of life insurance policies are often referred to as protection policies and investment policies. Protection policies are typically designed to afford a benefit (e.g., lump sum payment) pursuant to an event (e.g., death). The most common kind of protection policy is called a term life insurance policy. Investment policies, on the other hand, are typically designed to foster the growth of capital through ongoing or onetime premium payment. The most common kinds of investment policies are whole life insurance, variable life insurance, and universal life insurance.

Not surprisingly, the types of shocked beneficiaries I allude to above find that the deceased policyholder possessed an investment policy rather than a protection policy. Unfortunately, most lay life insurance purchasers have the lump sum death benefit common to a protection policy in mind, but often end up innocently / mistakenly purchasing an investment policy instead.

Of course, if you want to know more about the particular types of life insurance mentioned above, the internet (e.g., Wikipedia) is loaded with specific information. But the basic moral of this story is to be mindful of the type of life insurance being purchased and whether such insurance is most suitable for your particular needs or the particular needs of the person on whose life insurance policy you are named beneficiary.

Life Insurance Claim Articles