The laws around life insurance vary from state to state, but there are many basic rules that help protect policyholders and their families. While these are questions about life insurance, the laws around this insurance applies to MPI or mortgage protection insurance. These include free look periods, grace periods, and timely payment of claims.
What is a life insurance policy?
A life insurance policy is a contract between an insurer and a policyholder that guarantees the insurer will pay a certain amount of money to a designated beneficiary when the insured person dies. This payout can go to a single person, such as a spouse or a child, or it can be divided among multiple beneficiaries.
Who can sell life insurance?
Only a few companies are allowed to provide life insurance, and these companies are regulated by state insurance departments. These departments maintain strict oversight and verify independently that the companies have enough resources to meet their financial obligations.
Who can make a claim?
In some states, the company can deny a claim if the cause of death was suicide or the policyholder made a material misrepresentation in the application. However, in most cases, the policyholder can’t be denied a claim after two years of paying premiums.
What can the proceeds be used for?
Some people use the proceeds of a life insurance policy to help their loved ones pay off debt. This could include student loan debt, private loans, or cosigned credit cards. It also can be used to cover funeral expenses or reimburse a family member for a loss of income.
What are the benefits of a life insurance policy?
One of the perks of a life insurance policy is that the death benefit is usually tax-free. This means that your beneficiaries won’t have to report the money as income, allowing them to keep it in a savings account or spend it on whatever they want.
What should I do with my life insurance proceeds?
There are many reasons that people purchase life insurance, and a qualified attorney can help you decide what to do with your proceeds. Some of the most common uses are to pay off a debt, cover funeral costs, and provide for your loved ones.
How can I change my beneficiary?
If you want to change your beneficiary, you’ll need to submit a new form to the company. The forms are often available online, so you can easily fill them out and send them in.
What’s the difference between lump sum and specific income payout?
A lump sum payment is a large amount of money that is paid out all at once. This is usually the most common option, but some companies allow you to choose a different payout method if you desire. Depending on the cost of your policy, your payout amount and structure will vary.
What is the best way to receive a life insurance payout?
Some companies offer a lifetime annuity, which is a fixed, recurring payout that your beneficiaries can enjoy for the rest of their lives. These annuities can be a great way to leave your beneficiaries a significant lump sum when you die.