Lesser Known Categories of Life Insurance

Hello All,

There are some types of life insurance that the general public may not be familiar with so a small introduction to these varieties can come in handy. Prevent lost or unclaimed life insurance by knowing what these are.

While most of us are not in a position to finance loans for other people we are often in the position to apply for a loan.  When seeking a large credit line you should be aware that a lender can purchase a life insurance policy, called “credit life”, to pay off any remaining balance you owe upon your death.  A lender can also mandate that you purchase a credit life policy in accordance to their loan conditions.  A borrower may not need to purchase a credit life policy if he or she already has a term or whole-life policy in place.  In this case the borrower must establish the lender as a partial beneficiary guaranteeing that any remaining loan balance will be paid upon his or her death.   A variation on credit life is an accident and/or health policy which will cover remaining balances if you are unable to meet loan payments because of illness or injury.  These policies are usually attached to and paid for in concert with loan costs.

Another type of life insurance that is becoming increasingly popular is funeral insurance.  This kind of policy is set in place to ensure that funeral expenses are covered in advance.  This insurance can be extremely costly if in place for longer than 10 years or so and often comes with a graduated coverage amount for the first several years.  This means that if you die before you have met a specified number of payments that the death benefit will provide the coverage that it was intended to upon its purchase.  Often a better solution to the expense of funerals and/or burial is to invest in a cemetery plot and funeral expenses ahead of time and make payments directly to the funeral home.  Another option is to set aside a specific portion of your term or whole life insurance policy to pay for these expenses.

Home service life insurance policies are sold door to door.  You should be careful before purchasing a policy this way.  Make sure you understand the terms and the benefits provided by the policy before signing any documentation.  A similar type of very limited term life insurance policy is being sold at some department stores.  These policies are usually one year term policies that provide very limited coverage. 

When looking to purchase any type of insurance it is important to find a reputable company to purchase a policy through.  It is also important that you understand your policy thoroughly.  Keep in mind that upon your death your beneficiaries need to be able to locate your policy information so you should leave the name of your provider as well as a reference or policy number in a safe place that you have shared with a loved one.   Weigh the benefits and costs of different kinds of insurance before choosing a policy that you will be paying on for years to come.

Until next time,

Michael Hartmann http://www.findyourpolicy.com/

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