Insurance - Head Matters

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3. Life Insurance

Let’s move on to talk more about the specific types of Insurance. We’ll begin with Life Insurance.

The primary purpose of life insurance is to protect survivors who depend on the insured person, also called the policy owner, for financial support. Unlike the beneficiaries of other types of insurance, the beneficiaries of life insurance — people who receive the benefits — aren’t the insured person. His or her survivors are the beneficiaries. There can be more than one beneficiary of an insurance policy.

A key to the amount of life insurance a person needs is the amount of additional money the survivors will need to maintain their quality of life if the insured person dies.

Life insurance can also be a valuable financial tool for planning what will happen to your remaining money after you die, which is called estate planning.  It can help in transferring ownership of a business after you die, which is referred to as business succession planning.  In this unit, we’ll focus on the benefits of life insurance for your family. 

Let’s  look at an example. Joe is the only person in his family who works outside the home and earns money. Joe is supporting his wife and two children with his paycheck. If Joe were to die unexpectedly, his family would have financial trouble because they depend on Joe’s paycheck. However, if Joe purchases a life insurance policy, he transfers some of the financial risk of his death to the insurance company. Joe would pay the insurance company a monthly fee, called an insurance premium, and in return, the insurance company would agree to pay Joe’s family a certain amount of money if he dies.

 

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