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Life Insurance Overview


The primary purpose of life insurance is to provide a financial benefit to dependants upon premature death of an insured person. The policy pays a specified amount called a “death benefit” to the named beneficiary, when the insured dies.

People purchase life insurance for many reasons; to provide an income to replace lost earning potential, to fund business or partnership buy outs in the event of death of one of the business owners, to fund retirement plans, to indemnify a loan in the event of premature death, to pay for college educations, to provide dependency income for the family, and to protect future insurability, are just a few.

Most life insurance policies contain an incontestability clause. This means if the insured dies during the contestable period, the insurer has the right to review the insured’s medical history before they pay or deny a claim. This could mean a delay since the insurer must request medical records. If there is a disagreement on how the proceeds of a policy are to be paid, the insurer can file for Interpleader with the court.

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Life Insurance Guide
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In some instances, you can borrow money from a life policy that has a cash value at a reduced low rate of interest. If the policy is surrendered or the insured dies before re-paying the loan, the amount of the loan including accrued interest is deducted from the claim check. If a premium is missed, the company may pay the premium with the cash value which can cause the cash value to be depleted. If a life policy is allowed to cancel, the insurer may reinstate the policy after evidence of insurability has been provided, up to three years after the cancellation. If reinstatement is allowed, all back premiums owed from the date of cancellation to the date of reinstatement must be paid. Payment normally includes interest.

A person 15 years or more may contract for life insurance on his/her own life, or on another person in which the minor has an insurable interest. The minor may exercise all rights and powers with respect to the contract as may be exercised by a person of full legal age. While discussing insurable interest…a person wishing to purchase life insurance on another’s life must have an insurable interest at the time of purchase.

Life & Annuities Top 5 Common Concerns

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