Insurance is protection from loss, damage, or destruction (the “event”) for a set period of time paid in the form of premiums by a policyholder to an insurance company based on terms agreed to by the parties. Upon occurrence of the event, the insurance company is obligated to pay the policyholder but may delay paying or decide not to pay in reliance on one or more provisions in the insurance policy.
It is important to make sure you understand all terms in an agreement before signing to give yourself the best chance of receiving an insurance payment in the amount you expect and when you expect. If you assume or assign a meaning to a provision that is different than the insurance company’s, you can find yourself in forced arbitration or court with either resulting in no or a reduced expected pay out.
Life insurance should be seriously considered for individuals with young children, a spouse, and certain family members. A life insurance policy can be purchased for a child, parent, sibling, or relative who does not earn income if the death of the person is likely to result in significant impact on your family. The person buying the insurance policy does not have to be the person whose life is insured by the policy. However, the person purchasing the policy must have an insurable interest in the person’s life such that the death of the person would have a significant impact on you or your family in some material way.
There are different types of life insurance policies to choose from but the key is deciding on the policy that best fits your situation. There are three general types of life insurance: (1) term life in which a premium is paid for a predetermined period of time; if the person does not pass away within the predetermined period of time the policy ends, but if the person does pass away the insurance company will make a lump sum death benefit to the beneficiaries; (2) permanent life that includes whole life insurance in which you pay a premium that is guaranteed for life to be paid to your beneficiaries; and (3) hybrid life insurance combines elements of term life and whole life.
Insurance companies vary in their financial stability, therefore you should do research before purchasing an insurance policy.