Life Insurance is a way of providing financial protection should you die. It is one of the most important purchases people can make.
There are two main categories of life insurance Term Insurance and Permanent Life Insurance.
Life insurance is aimed to make sure that all the people you care about will have financial support, when you will not be there to care for them yourself.
If you die and have a Life Insurance policy with a named beneficiary the proceeds will flow directly to your chosen beneficiary with a minimum of delay. This will provide your loved ones with cash to help your family meet many common and important financial needs such as:
- Replace your income
- Daily living expenses
- Medical bills
- Funeral costs
- Lawyer’s fees
- Mortgage payments
- Taxes
- Debts
With each life assurance policy you pay a monthly or annual premium to provide cover for a specific period of time or until death, whenever that may occur.
Insurer
The insurer under a life insurance contract is the person or organization that contracts to pay out the policy death benefit to the named beneficiary, in the event that the life insured should die while the policy is in force.
Life Insured
The life inured under the policy is the person upon whose life the policy is based. It is the death of the life insured that triggers the payout of the policy death benefit.
Beneficiary
The beneficiary under a life insurance policy is the individual to whom the death benefit is paid in the event the life insured should die while the policy is in force.
The beneficiary should be a person, an organization or the estate of the policy owner.
The beneficiary is normally named by the insured on the application at the time the policy is applied for. Changes in beneficiaries can be made at any time.
If there is no named beneficiary on the policy or if the beneficiary dies before the life insured and no Contingent Beneficiary is named, in the event of a death claim the policy proceeds will be paid to the insured’s estate
If you name a spouse as a Beneficiary and you have a child/children, you need to name your child/children as Contingent Beneficiaries. Always List their names and the split. In addition, if there are grandchildren you can also designate them as beneficiaries.
If the beneficiary is a minor, you must appoint a Trustee. Otherwise, the proceeds may be held by the Court until the minor is of legal age.
If you do not have a child/children you may want to consider naming a family member or friend as a Contingent Beneficiary. If you do not name someone and the Primary Beneficiary has died, the proceeds will be included when your Will is probated and this will cost your Estate more money.
If you have a named beneficiary the proceeds will flow directly to your chosen beneficiary with a minimum of delay.
Using “Estate” as a beneficiary can expose the insurance proceeds to a multitude of problems.
The proceeds will be included when your Will is probated and this will cost your Estate more money. If you do not have a Will, the court will appoint an Administrator and this will cost extra. Insurance proceeds cannot be cashed if there is no Administrator or Executor.
In naming your Estate, you loose creditor protection. Your Executor or Administrator can charge a fee to your Estate based upon the value in your Estate.
Braun Financial Services is able to assist you with questions on Life Insurance policies and is able to offer a variety of insurance products. For additional information and insurance quotes, please contact us.