Term Life Insurance Articles
Ways The Payout For Term Life Insurance Is Used
2010-06-09
Term life insurance is the original form of life insurance offered by North American companies and continues to be popular even today. With terms ranging from one year to 20, 30, or even 40 years, and with options like flat rates and guaranteed insurability, term life insurance is one of the most versatile life insurance options available. While no family wants to collect on their life insurance policy, there are times when the most unexpected of events can occur, and the value of the policy must be paid out. Despite knowing about and in many cases paying into a term life insurance policy, many Americans are unaware of the rules governing both the payout and use of life insurance coverage. Here are a few of the pertinent facts.
First, term life insurance policies have no face cash value. That is, they cannot be borrowed against or taken out in part early for something like education or a down payment on a house. This is different than a whole life or universal policy, which will permit money from the policy to be used for investments, schooling, or other approved functions. A term life insurance payout has no value until the insured has passed away, the paperwork has been completed, and the check delivered. If the insured dies one day after the term is up, or if the premiums are not up to date, no benefit will be paid. Similarly, if the policyholder dies of a pre-existing terminal illness, it is possible that the life insurance will not pay out, depending on the exemptions contained in its contract. It is worthwhile to know what exactly a term life contract covers before signing.
Once money has actually been dispersed to the designated family members, the choice of what to do with it is left up to them. Mortgage payments, funeral costs, education or even a vacation could be purchased with a life insurance payout. So long as no fraud has been committed, the money is issued by contract to the parties named, and they have the right to do with it as they see fit. Unlike borrowing out of a whole life insurance policy which has not yet paid out, a term policy that has come into force after a client's passing carries no rules about how the money needs to be used.
There are no guarantees about the speed at which a claim will be processed after a death. A good insurance company should be able to have the process almost completed within a week, so long as there are no extenuating circumstances. Regardless of the timeline, however, the ultimate choice in what to do with any insurance payout rests with beneficiaries, not the company.
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Term life insurance is the original form of life insurance offered by North American companies and continues to be popular even today. With terms ranging from one year to 20, 30, or even 40 years, and with options like flat rates and guaranteed insurability, term life insurance is one of the most versatile life insurance options available. While no family wants to collect on their life insurance policy, there are times when the most unexpected of events can occur, and the value of the policy must be paid out. Despite knowing about and in many cases paying into a term life insurance policy, many Americans are unaware of the rules governing both the payout and use of life insurance coverage. Here are a few of the pertinent facts.
First, term life insurance policies have no face cash value. That is, they cannot be borrowed against or taken out in part early for something like education or a down payment on a house. This is different than a whole life or universal policy, which will permit money from the policy to be used for investments, schooling, or other approved functions. A term life insurance payout has no value until the insured has passed away, the paperwork has been completed, and the check delivered. If the insured dies one day after the term is up, or if the premiums are not up to date, no benefit will be paid. Similarly, if the policyholder dies of a pre-existing terminal illness, it is possible that the life insurance will not pay out, depending on the exemptions contained in its contract. It is worthwhile to know what exactly a term life contract covers before signing.
Once money has actually been dispersed to the designated family members, the choice of what to do with it is left up to them. Mortgage payments, funeral costs, education or even a vacation could be purchased with a life insurance payout. So long as no fraud has been committed, the money is issued by contract to the parties named, and they have the right to do with it as they see fit. Unlike borrowing out of a whole life insurance policy which has not yet paid out, a term policy that has come into force after a client's passing carries no rules about how the money needs to be used.
There are no guarantees about the speed at which a claim will be processed after a death. A good insurance company should be able to have the process almost completed within a week, so long as there are no extenuating circumstances. Regardless of the timeline, however, the ultimate choice in what to do with any insurance payout rests with beneficiaries, not the company.
