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Life Insurance

Life Insurance Policies

Life Insurance Policies

Chicago Insurance Advisors

Life Insurance is a contract between a company, known as the insurer, and an individual or the insured. The insurer has a legally enforceable obligation to pay the insured a stipulated amount of money as protection against economic uncertainty or losses in the event of an accident, illness, or death. In return the insured makes payments or premiums.

Over the past few years, economic difficulties forced many people to foreclose on mortgages or lose savings because of unemployment and could no longer afford college tuition for their children. Others were forced to pay high medical bills or cover costly end of life funeral expenses. Simply put, life insurance is good for anyone who is financially responsible for somebody else both present and future.

Based on the principles of pooling and spreading of risk, individuals pay a small amount every month in order to cover the uncertainty and expenses of a loss such as disability or death. This transfers the risk to a company who pools or spreads the money over a large group of people in order to guarantee that funds will be available whenever a claim arises.

There are three major types of policies: whole, term, and annuities. Whole life policies are based on the health and age of the applicant, accumulate cash value, and provide permanent protection that lasts until a person dies or reaches age 100 at which time a death benefit is paid to the beneficiary. There are different types of whole life policies that vary whether the premiums are fixed or flexible and if the product is interest sensitive. Term policies have lower premiums then whole life policies, provide temporary protection for a specified amount of time or term, can be renewed to a new term policy, converted to a whole life policy, but do not accumulate any cash value. Annuities are a flexible product designed to provide a stream of income, in exchange for payments, at regular intervals throughout the policy or after retiring.

In addition to the transfer of risk, some of the major benefits are end of life security, a hedge against inflation, estate planning, asset accumulation, mortgage protection, education funding, and favorable tax treatment on loans, cash value, and any death benefits paid to beneficiaries.

 

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