- What Is A Life Insurance Policy?
What is life insurance, how does it work? A life insurance policy is a binding agreement between a life insurance company and an insured person. The company agrees to pay a predetermined amount of money to the beneficiaries of the insured upon his or her death in consideration of certain agreed upon premium payments.
- Why Would You Own A Policy?
Anyone who has a person or persons dependent on him or her financially has a need for some life insurance. The amount would vary between individuals. If you have dependent children you need to own sufficient life insurance to guarantee your income for as long as the children are dependent. Think in terms of guaranteeing this income until the youngest child graduates college.
Some spouses dedicate their lives to raising the children in a proper and beneficial manner. It follows that the wage earner should own sufficient life insurance to provide sufficient income for the surviving spouse, preferably for the rest of her life.
If you own a business you may choose to buy life insurance to fund buy sell agreements in the event of the death of a partner or shareholder. You could also use life insurance to protect the business from loss should a key employee die.
- How Much Life Insurance Should You Own?
Each persons need differs. The best way to determine how much you need is to use a life insurance
needs calculator.
It will give you a precise figure to work with.
If you are a partnership the company could buy life insurance on each partner based on the value of his or her shares. The policy may be owned by the partnership or by the other partners.
If you are a corporation the policies on each major shareholder is usually owned by the corporation itself. Key employee life insurance is usually owned by the business and the business is the beneficiary.
- Which Type Of Policy to Buy?
There are basically 2 types of life insurance, term and permanent. Term life insurance is purchased for specific periods of time and permanent life insurance lasts for the rest of your life even if you live to age 100. The type you buy is usually based on your particular need and the length of time you plan to keep your policy for.
- Life Insurance Fundamentals
The details of how your policy works are described in the policy itself. You will get a better understanding from this page.
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