By An exhaustive financial plan includes investments, mutual funds, bonds, and even real estate properties. Mark Hauser is a veteran private equity investor and fund manager with nearly four decades in the industry. Along the way, private equity principal Mark Hauser came to realize the importance of a life insurance policy.
Life insurance policies are rarely discussed but incredibly important when the time comes for them to pay off. Whether you’ve thought about life insurance policies or the thought has never crossed your mind, Mark Hauser leapt into the industry to explain its benefits as well as the process that one must undertake.
Defining Life Insurance
Life Insurance is considered a legally binding contractual agreement between an insured individual (policyholder) and the life insurance company that they have chosen to work with. Policyholders can be insured by multiple entities, such as a corporation insuring its Chief Executive Officer.
Throughout the lifetime of a life insurance policy, the insured individual will pay premiums be they in lump sums or regular installments. Insurance policies with larger arrays of benefits or for individuals at higher risk will often have higher premiums associated with them.
When a policyholder passes on, the insured policy activates and pays off its face value or death benefit to the named beneficiary or beneficiaries. A $300,000 Death Benefit would correlate to a payout of that same amount.
The Living Benefit Clause
While life insurance traditionally pays out upon the passing of an insured individual, some policies possess a Living Benefit clause. A Living Benefit Clause is for individuals with critical, chronic, or otherwise terminal issues. If the policy ends up qualifying, the company will then pay out a portion for the death benefit even while the insured individual is still alive.
Potential For Insured Solvency
Even though this is a lesser-discussed concern, there is the very real potential for an insurer to become financially insolvent over the years. If a company becomes insolvent or otherwise cannot pay out its claims, the state can step in to satisfy the subject life insurance obligations left behind through guaranty funds.
Types of Insurance Policies Available
Once it comes time to get down to business and pick an insurance policy, individuals will need to choose between Term Life Insurance and Permanent Life Insurance. These two policies share one thing in common: they both pay out to beneficiaries upon the passing of the policyholder.
Term Life Insurance – This insurance policy is activated for 10, 20, and 30-year increments. Policyholders must undertake regular payments to ensure their policy remains active. Upon renewal, policyholders may be asked to pay a higher premium.
Permanent Life Insurance – This form of insurance policy gives individuals comfort in the form of longevity, providing protection for the duration of the policy. Permanent life insurance is however more expensive with higher premiums.
