Life Insurance And The People Involved

Every life insurance policy has, at a minimum, five parties. The insured, the payor, the owner, the beneficiary (or beneficiaries), and the insurer. This may come as surprise to many people since often times a single person serves as three of parties of a life insurance policy.

The Insured is the person being insured. Insurance, for the most part, can not be purchased on a person with their contest. Additionally, there must an insurable interest at the time of the purchase. An insurable interest simply means that the insured and the beneficiary have a relationship as defined by the insurance company. For example a domestic partnership or parent and child.

The Payor, is exactly what the the name implies this person pays the monthly premium on the policy. For example you may have a parent on a fixed income who may not be able to make the monthly premium payments on their life insurance policy; in this case your parent may designate you as the payor and you would then be responsible to make the monthly payments.

The Owner is the person that owns the life insurance policy. This person has the power to change beneficiaries, the terms of the policy, and even the payor.

As you can see, despite all of the paperwork, a life insurance contract is a very basic concept. Normally the person purchasing life insurance is the payor, the insured, and the owner. However in some instances different people do fill these roles. Usually when a parent failed to purchase life insurance early in life and can’t afford to pay the premium, a child will step in and serve as the owner and payor.

One of the last two parties of a life insurance policy is The Insurer. The insurer is the insurance company. Oftentimes people make the common mistake of believing that an they can simply purchase insurance. That is not ture. The insurance company has the option to deny you from being coming a client. Oftentimes the denial is the result of a lack of insurability. Insurability is ability to purchase life insurance and is often for granted; until they are diagnosed with a disease or experience an illness such as kidney failure. I’ve had clients denied for insurance because of diabetes seizures, mental illnesses, obesity and a variety of other reasons. If accepted by an insurance company, only the insured, owner, or payor (if they can no longer pay) has the ability to cancel the contract.

Lastly we have the The Beneficiary.  As implied by the title, the beneficiary (or beneficiaries) receives the benefit of the life insurance policy. Life insurance, if viewed as a family purchase, is the best investment a family can ever make. Providing that it is purchased early and the insured is of standard health.  Don’t believe me? Do the the math. You should find that the beneficiary will receive double, if not more, the total amounts of premiums paid.

Steve Isidor
Personal Insurance Advisor
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