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Life insurance policies offer options

Some people don’t believe in life insurance. Maybe it is because they don’t understand the concept. Life insurance is to replace the earning power or human life value of a person if they experience premature death. In simple terms, it replaces a wage earner’s paycheck for the family if that person dies early in life.

Life insurance policies are legal contracts. Policies with cash values have a valuable section inside called non-forfeiture values. These are choices within the life insurance contract. If the policy expires or lapses because of non-payment of premium, the insured may surrender the policy for the cash value, elect to receive a paid up policy for a reduced amount of life insurance, elect to take no action and the policy will automatically become a term-life plan for a certain number of years and days depending on the cash left in the policy.

Never discard or destroy an old life insurance policy until a competent life insurance agent has checked its status. You may be throwing away cash.

Another important and useful section in most life insurance contracts is the settlement options. When the insured dies, a life insurance benefit will be paid. Settlement options offer choices of how the proceeds are to be paid. The insured may select a choice before death or the beneficiary may choose after the insured is deceased. Life insurance proceeds are normally income tax free to the beneficiary.

The settlement options include a lump sum cash payment and an interest-only settlement when proceeds are left with the insurance company. This is normally only for a short time, giving the beneficiary time to make a decision about a permanent settlement option. A third option is a fixed time period option when the insurance company calculates an annuity type payment to pay out all monies by the end of of a certain length of time. The choice must be made before the first payment is made. The fourth option is a fixed dollar amount where beneficiaries will receive the monies until they are paid out. The fifth option is a life income or annuity where equal installments are paid to the beneficiary for life to protect the proceeds for the family in the event of an early death of the beneficiary. A choice can be made to include a guarantee of the payments continuing to a second beneficiary until all proceeds are paid.

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