Life Insurance 101
Life insurance, one of the largest and most important industries in America, is a product with far-reaching social and economic implications. Its first attribute is economic security. It provides individuals with an important planning vehicle through which they can obtain financial security for their families and businesses. It also serves the economy as an important channel where capital is made available to individuals and businesses for economic growth.
Life insurance was once considered as only an isolated financial product designed to protect policy owners from the financial consequences of a premature death. Little attempt was made to integrate life insurance planning with the complete array of products offered by all types of financial institutions. In recent years, it has become increasingly difficult to view insurance products solitarily from a comprehensive financial planning process. This is due in part to the growing popularity of the financial planning approach, and in part to the integration of the financial services industry; where a broad range of financial products are readily available within one financial services organization.
Life insurance means many different things to many different people. It can serve in various ways through one’s overall planning for the uncertainties of the future. Life insurance is a risk management tool that can be combined with other products to provide efficient, effective, and comprehensive financial plans for individuals and businesses, especially when designed in ways to attain financial goals under a variety of uncertain future conditions.
Life insurance creates capital with guaranteed results, and few products can offer that. It is property bought with a contract containing contractual guarantees that will provide large amounts of money upon the insured’s death usually tax free. The amount of death benefit payable is typically much greater than the premiums paid into the policy.
If we knew when we were going to die life insurance would be far less necessary. The amount of money needed at that questionable date could be saved systematically, through what is called a sinking fund (savings account). However, if the person died before the desired amount was accumulated, there would be little to no way to ensure that the needed money would be generated in time.
Life insurance is essentially a financial mechanism that guarantees a desired accumulation at the time of death, regardless of when death occurs. Life insurance is not morbid and it is not only for those who die. It provides for those who live, and this is why it is called life insurance, not death insurance. It is the only means through which one can provide a definite sum of money for an indefinite time in the future.
The life insurance contract is the insurer’s promise to pay the policy’s face amount upon the proof of the death of the insured, and it is backed by one of the oldest, largest and most regulated financially sound industries in the world.
About the author: Kyle McDonald holds FIC, FICF, FSCP® & CLTC designations. His viewpoint on life insurance is simple, “Anyone with a family must have life insurance. In the end, life insurance is for others you care about, not you.” He is ready to help you and your family get the best option available. Contact Kyle today at 1-800-651-1953 or KMcDonald@Pivot.com.