Have you ever thought about giving a loved one life insurance as a Christmas gift? It’s not a typical question that comes up during the holidays, but it’s a great way to show you care about the close members in your circle. Here are some of the reasons why life insurance is a special and memorable gift.
How Life Insurance Works?
It’s important to understand how life insurance works before you decide to give it as a Christmas gift to a family member. Life insurance pays the beneficiaries when a covered policyholder passes away. It ensures that a family is able to meet their living expenses in the absence of their breadwinner.
Nonetheless, it’s kind of a complicated gift because it requires permission from beneficiaries before they can be included in the plan. In other words, it can’t be a traditional holiday surprise. Your beneficiaries will have to sign paperwork and take a medical exam to give the insurer data on how to set rates.
Another dimension to life insurance is choosing the right type of plan that makes sense for your family. The three main types of life insurance are term life, whole life, and universal life insurance. Term life is the cheapest form of life insurance but only issues payouts during a specific period.
Individuals with high income often select the more extensive and expensive coverage known as whole life insurance. This plan operates more like a growing investment over time that the policyholder can tap into for paying bills while alive. Universal life insurance is similar to whole life since it builds cash value, except it provides more flexibility in payment options.
Insurable Interest and Approved Beneficiaries
In order to gain an insurer’s approval for adding names to an existing life insurance policy or taking out a new one, you must provide proof of financial need. Insurable interest must be demonstrated in the form of proof that beneficiaries will suffer financially when the policyholder dies.
Your beneficiary can be your spouse, children, siblings, and business partners. Sometimes when a parent co-signs for a private student loan, they enroll their child in coverage that pays off the loan debt if the student dies during the term. In other cases, an individual might buy life insurance for family members to ensure they get proper care even after the policyholder dies.
A housewife who stays at home to raise kids can be covered by her late husband’s life insurance policy and receive benefits. Another option is for each parent to have their own life insurance policy if both parents earn income. Whatever your family plan is, the paperwork must be signed before the policyholder’s death so that the beneficiaries can receive the benefits.
Giving life insurance to a family member as a Christmas gift shows them that you care. Contact us at John E. Peakes Insurance Agency to learn how you can get the right life insurance coverage for your loved ones.