Are you thinking about purchasing a personal life insurance? In this article, we’ll give you some general guidelines on who can you insure. We’ll also look at who can be the beneficiary. The word personal does not mean only the insured can buy a policy personally. Personal life insurance means insuring the life of a person. Now, who can insure who? Can you take out a policy on just anyone on the street? No. The primary prerequisite is insurable interest.
What Is Insurable Interest?
It is the number one thing that any insurance provider will look for. This means you have to have an interest or a need for the insured to remain alive. The most obvious person is one self. Life insurance companies presume you want to stay alive. In some cases, people do consider getting a personal life insurance policy to resolve immediate financial issues. As a result, life contracts include the “suicide clause”. This clause is usually a 2 year period, when if the insured commits a suicide, the death benefit is not paid out. Your direct family members are also included in the insurable interest presumption. These include your spouse and children. Taking out a life policy on your aunt or a cousin would raise questions.
An insurable interest can also be found in business. There are so called buy-out policies, which allow partners to insure each other. This allows them to buyout the share should something happened to one of the partners. An employer can also take out a key-person life policy on a vital employee, or executive.
Insurable Interest in Juvenile Policies
With life policies for children, the insurable interest becomes a little tricky. Any close family member can gift a life policy to the children in the family. In this case the direct relation is not a requirement. This means you can gift a policy to your nephews or grandchildren. Insurance companies presume that all parents love their children. However, every rule has its exceptions. Insurance companies must avoid the unpleasant situations relative to parents with ill intent. This is why states generally require the parents to have a life policy as well. The value of the policy differs by state and child’s age. The younger the child, the more life insurance must the parents have.
Personal Life Insurance Beneficiaries
The person purchasing a life policy can appoint anyone a beneficiary. There are no restrictions on this. There are 2 types of beneficiaries, first are revocable and second are irrevocable. If you chose your beneficiaries to be irrevocable, then you cannot remove them, or at least not without their knowledge. If on the other hand you appointed revocable beneficiaries, then you may change them at will. They don’t get any notice. You don’t need their consent. Insurance companies will not disclose either of the types of beneficiaries to third parties. All information is kept confidential.
When you start shopping for a personal life insurance policy, be aware that it is a long term decision. Actually, it should be a life long decision. Don’t take it lightly. Take your time, shop around, find a broker and talk to him or her. Brokers can offer you multiple tailor made illustrations from several companies. Be ready to provide a variety of very personal information. Do not rely on generic online forms. These forms cannot know what to ask, they are generic, not personal.