Who Can Be a Beneficiary on Your Life Insurance Policy?

It’s true. When you apply for a life insurance policy you must choose a primary beneficiary with an insurable interest in you if you want to get your life insurance policy approved by the underwriters. Insurable interest is generally broken down into two types of loss-emotional and financial. In order to have an insurable interest in your life, your beneficiary must fall into one of these categories.

Insurable Interest: Financial Loss

There are many individuals and businesses that could suffer a financial loss if you were to die. Your lenders many not get loans repaid in the event of your death, your spouse might not be able to support him or herself without the assistance of your income, your children may not be able to go to college. In addition, your parents, spouse, or siblings might not be able to afford your funeral expenses. Your business partner or boss may no longer be able to run the business properly and could suffer financially without your knowledge, image or experience.

When naming a primary beneficiary that will experience a financial loss at your death, no justification is required when that beneficiary is an immediate family member. If the beneficiary is a lender, business partner or boss, then additional documentation and letters of explanation may be necessary.

Insurable Interest: Emotional Loss

There is an undeniable group of people who would suffer an emotional loss upon your death. Your immediate family-parents, spouse, children and siblings would certainly feel a tremendous emotional void if you were no longer around. While this emotional loss does not necessarily result in a financial need, it does set up an acceptable environment for the issuance of a death benefit.

Unless you are naming a far removed family member as your primary beneficiary, there should be no need for a justification of the choice that you make. Be sure to be very clear about the amount that you want each beneficiary to receive if you are naming multiple beneficiaries. If you are leaving the benefit to a minor, consider setting up a trust in the event that he or she should receive the benefit before reaching a financially mature stage in life.

Exceptions to the Rules

There are always exceptions to the rules. If you want to leave your death benefit to a funeral home, although they would gain financially from your death, you can do so. This is acceptable because it simply avoids awarding funds to a middle man (such as a parent or spouse) who will only turn the funds over to the funeral home anyway. However, it is important to note that they will receive the entire death benefit when you do so.

If you have no family and no creditors, you may decide to leave your death benefit to a friend. In this event, it is generally preferred that you leave the funds to your estate and simply leave a will with instructions for the distribution of your estate assets. While this will result in your life insurance proceeds going through probate, it is a faster way to get your death benefit approved.

Once your policy is issued, the question of insurable interest no longer has any bearing and you can change your beneficiary to anyone that you would like. Just contact your insurance company and find out how you need to submit the beneficiary change information. Some insurers might have a form you need to complete while others might just request a letter. If you are not the owner of your own insurance policy, remember that it is the owner who must sign off on any beneficiary changes. Once your change is complete, let your beneficiaries know and keep a copy of the submitted change request with your policy to help avoid any confusion after you are gone.

How to Find a Life Insurance Company

Ratings on Companies

Many people wonder how to go about choosing a life insurance company. In truth, there are several factors that can determine one’s decisions to pick one company over another. More often than not, the deciding factor comes down to the price of the monthly premium.

The premium needs to be affordable enough for one to pay it off each month without it making a huge dent in their finances. A good life insurance company does not want to bankrupt their clients with each premium – quite the contrary in fact.

Insurance companies want to keep their clients as happy paying customers so that they actually have a business to run. If there is no one paying the premiums, then there is nobody to insure.

Thus, life insurance companies will do everything they can to convince a prospective customer that they are the best possible choice.

Be Wary of Life Insurance Scams

However, keep in mind that companies that bend over backwards and offers great premiums may not actually looking out for one’s best interest. In order to avoid scams, read the fine print of their policies. Will loved ones receive the policy without due? Does it take a while for a claim to be filed? One should read reviews and comparisons of life insurance companies in order to weed out the bad ones. This will be easy to find because insurance companies are not like other holders as they are regulated by each state via a special commission. Thus, finding the truth about a company is actually quite easy. One can trust the sources and reviews found through the commission because they are an unbiased organization that was created to help people looking for life insurance policies.

The records are public, but it helps to understand how to read them in order to understand the reports. If a company looks like it has many issues, then one should also look at the number of claims it has handled. If the number is relatively low compared to the overall claims, then the chances are it is not a scam company.

The insurance commission is designed to help weed out bad companies that just exist to take advantage of people during delicate situations. There is no need for anyone to worry about picking a company that is fraudulent because most likely it will not happen. One just needs to trust their instinct.

Now, What is Next?

In conclusion, finding a life insurance policy that is both affordable and comprehensive is not so difficult after all. As long as one researches their top choices and considers them carefully, then there is nothing that they should worry about. A good life insurance company will not take one’s family for a ride should the need ever arise to make a claim. People can rest easy knowing that their family is well taken care of should anything ever happen to them. However, one should not worry about that as life still needs to be lived!

Understand The Suicide Clause In A Life Insurance Policy

A policy holder who feels like he is down in the dumps would be tempted to take his own life only to leave his loved ones a considerable amount of money from a life insurance policy. Suicide of a family member is one of the most disheartening situations any family can encounter. This incident could also complicate the process of claiming the life insurance benefits. But the question whether an insurance company will grant the insurance benefits to the recipients will be hinge on clauses in the policy. There are instances when a policy’s suicide clause holds back the redemption of the benefits. Sometimes the policy holder does not easily recognize this clause concerning suicide because some policies use languages like “intentional self-destruction” or “death by one’s own hand” to describe the act.

Forms

A suicide clause is just one of the clauses or stipulations that you can find most life insurance policies, while the stipulations may also differ to some extent depending on the state or country. Some insurers include a free look provision that offers the policy owner a considerable period of time to review a policy after it was issued to for the buyer to decide whether he wants to purchase the policy. Incontestability clause prevents the policyholder from annulling the policy after it takes in effect for a definite period of time, except if the policyholder cease from paying the premium.

Purpose

A suicide clause states that policy benefits will not be granted to policyholder’s beneficiaries if he ends his own life within a specific term following the inception of the policy. In circumstances a policyholder passes away within that period covered by the suicide clause, the insurer usually investigate the claim strictly to guarantee that the demise of the policy holder was not a case of suicide.

Benefits

A suicide clause guards an insurer against a circumstance where a policy holder commits suicide with the objective to give his recipients a considerable sum of money from life insurance claims. Considering the fact that contemporary life insurance policies can easily build up a face value of $100,000 or more, the clause can protect the insurer from disbursing such a significant amount of money.

Insurers are not the only one who benefit from suicide clause, even the desperate and emotionally distressed policy holders gains from this clause. For example, if a desperate policy holder learns that their beneficiaries might not get any benefits from their insurance plan if they commit suicide, the person may reconsider his attempt to commit suicide.

Time Frame

A suicide clause usually covers the first two years that the life plan has been in effect. In case the suicide transpired within that period, the insurer will just hand back to the policyholder’s recipients any premiums that have been given to that point. If suicide happened subsequent to the clause period, the life insurance company cannot refuse coverage.