Part II: The basics of an insurance Contract and the different kinds of life insurance

 The Key aspect of insurance is the contract. This is issued to the policy owner.  The policy owner also known as the insured is the person who applies for the insurance policy pays the insurance premium payments. Payments are made to keep the policy in effect so that when the person (life insured) dies the face amount ( the amount of insurance payable on the event covered in the contact) will be paid out. Each contract has a face amount which is the amount of insurance payable on the event covered in the contract.  The face amount is what the premiums that are paid are based off of and is paid out to the beneficiary on proof of death of the life insured. I hope that didn’t confuse you. All these things that I just explained are the basic elements that make up all insurance contracts.

An important part of insurance is the different between the idea of actual authority and apparent authority.  Actual authority is when the insurance company that the insurance broker is representing instructs the insurance agent to perform specified tasks. These tasks are performed by virtue of the agent’s actual authority granted by the insurance company.  This is very different from the ideal of apparent authority. Apparent authority is when certain tasks must be performed that do not fall within the agent’s actual authority. As such the agent acts with apparent authority.  An example of actual authority is delivering the policy contract to the clients.  Apparent authority is a gray area within insurance which insurance and can be a source of headache for companies when insurance agents exercise it to liberally.

A very important aspect of life insurance is that it is tax free. This makes it ideal for estate peruses as it not subject to probate fees and can be used to pay any outstanding debts of the insured person uncured by the estate upon death.

There are 9 main types of  personal insurance:

1)Term insurance

2)Whole life

3) Adjustable premium whole life insurance 
4)Term-100

5) Universal life

6)Disability

7)Accident & sickness

8) critical illness

9) long- term care

Another common insurance is business insurance.  Anyone with a small business or family business should have business insurance. It will be discussed in a later post.

Tomorrow: Term insurance, Whole life, Term-100, Universal life.