The Legal Concept of Life Insurance Contract

Within the small print on nearly every insurance policy, there is generally found some highly technical legal provisions and contractual terms. These terms are intended to cover just about every possible scenario – and, policies are usually being updated and revised continuously in order to keep up with both coverage and industry changes.

Life insurance is one of the best purchases you can ever make for your family and loved ones, but the whole process can be confusing. There are probably going to be terms and jargon you don’t understand. Most people just sign where they are told without understanding the forms or what they are signing.

That’s why we are here to help. It’s our mission to help you get the coverage you need and give your family the protection they need. We have years of experience working with all kinds of clients and different insurance contracts. Hopefully, this article will answer any questions you have about life insurance plans and the terms in the contract.

Components of the Insurance Contract

While many people may be familiar with life insurance policy premiums and benefits, it is also important to understand that insurance policies are considered to be legal contracts between the insurer and the insured. Such contracts will determine the claims in which the insurer is legally required to pay in exchange for a premium payment from the policy owner.

As life insurance plans are considered to be legal contracts, the terms that are found within these contracts will essentially outline the limitations of the particular events that are insured. With this in mind, policies will also typically include specific conditions under which coverage is specifically excluded. Some examples here can include claims that are related to fraud, suicide (typically excluded for two years after policy issuance), and acts of war.

How Life Insurance Differs From Other Types of Legal Contracts

Insurance contracts are designed to meet specific needs. Therefore, these contracts contain a number of features that may not be found in many other types of legal contracts. All insurance contracts, however, will essentially contain the same principles and processes. Such policies will usually assume the risk of an event that may or may not occur, and they will likewise pay the cost of a claim if such events do occur.

Your life insurance contract is the most important part of the whole insurance process. It’s the only thing which guarantees the policy will be paid out if something tragic were to happen to you. You should never sign a contract without reading through all of the various terms and conditions.

Therefore, based on insurance code, a valid insurance contract is required to have the following specifications:

  • The parties between whom the contract is being created
  • The property, asset, or life that is being insured
  • The interest of the insured in the property, asset, or life that is being insured – provided that he or she is not the absolute owner
  • The risks that are being insured against
  • The period during which the insurance is being continued
  • Either a) A statement of the insurance premium that is due, or b) A statement of the basis and the rates upon which the final premium will be determined and paid, provided that the insurance is the type where the exact premium can only be determined upon the termination of the contract

Outlining the Beneficiary

One of the important parts of the contract is determining who is the beneficiary of the life insurance plan. The beneficiary is the person, trust, or organization who will receive the payout from the policy if something tragic were to happen to you.

There are several kinds of beneficiaries you can put on your life insurance application. The primary beneficiary (or direct beneficiary) is the person who will get the majority of the money if you were to pass away.

You should also declare a contingent beneficiary on your contract. The contingent beneficiary is the person who will receive the payout of the policy if the primary beneficiary were to pass away before the plan were paid out.

Another type of beneficiary is a class beneficiary, which is not a specific person but a group of people. This could be your children, your parents, or any other group of people. One factor to be aware of if you plan on using a class beneficiary is to be specific in the members included in the group. If you’re going to leave your money to a group of family members, like your children, be sure to include if you want step children or half-children. There are countless stories of families having legal problems getting the money form a life insurance policy because of these type of issues.

Other Life Insurance Contract Considerations

As with other types of legal contracts, the parties that are involved in an insurance policy must be legally competent in order to enter into this type of an agreement. As an example, a minor child or an individual who is not mentally competent would not be able to legally enter into a binding life insurance policy contract.

Likewise, a legal contract such as life insurance must also have some type of consideration. Consideration is the premium payment that is made by the insurance policy holder. This can also include future premiums that are due from the policy holder in return for the ongoing insurance coverage.

For an insurance company, consideration can also be the funds that are paid out to an insured or their beneficiary when an insurance claim is filed. Therefore, the consideration component that is required in an insurance contract essentially means that each party to the contract must provide some amount of value to the other. Given this, should a policy holder stop making premiums after the grace period has expired, benefits will not be paid out to the policy beneficiary as the policy will be considered to have lapsed. We can put you in touch with the most reputable life insurance companies to find the best low cost life insurance available to you. If you have health issues you can still obtain no exam life insurance quotes so don’t let anything stop you from getting the coverage you deserve.

The purpose of a life insurance contract must also be legal – and it should not go against public policy. This means that the insurance contract could become unenforceable due to the insured’s wrongful conduct.

For example, if the insurance policy’s beneficiary caused the insured’s death, a life insurance policy’s proceeds would not likely be available to him or her. If, however, the beneficiary accidentally killed the insured, for example, in a auto accident, the insurer would not likely forfeit the policy proceeds. Therefore, when considering the purchase of a life insurance policy, it is important to keep in mind that the policy will constitute a legal contract between the insurer and policy owner. Let us help you find whole life final expense insurance today.

Working with an Independent Insurance Agent

There are thousands of insurance companies on the market, and all of them are going to offer you different products, rates, and medical underwriting. When you’re looking for life insurance, it’s important you find the best policy for you and your loved ones.
If you’re shopping around for coverage, you could spend hours researching companies and calling agents, or you can let us do all of the hard work for you. We are a group of independent insurance agents, which means we don’t work with one single company. Instead, we represent dozens and dozens of highly rated companies across the nation. Our agents can connect you with the best insurance plan to meet your needs.

Additionally, our agents can answer any questions you have about the life insurance contract and or the application process. We know the whole process can be long and frustrating, but it’s one of the best safety nets you can ever buy for your family.

If you have any questions about life insurance or the options available to you, please contact one of our agents today. We would love to answer those questions and ensure you have the proper life insurance.

You never know what’s going to happen tomorrow, which means you shouldn’t wait another day to get the insurance protection your family deserves. If something tragic were to happen to you, and you didn’t have insurance coverage, your family would be stuck with a massive amount of debts and other final expenses. Losing someone you love is never going to be easy, but being stuck with a mountain of debt is going to make the whole situation much worse.

About Jack D. Davis at InsuranceScored.com
About Jack D. Davis at InsuranceScored.com

Jack D DavisBorn and raised in a quiet suburb of Philadelphia, PA, the youngest of nine children, son of two wonderful parents, Jack developed his work ethic early on. While attending West Chester University, he volunteered to join the US Army Reserves for a six-year enlistment. Attending college during the day, working evenings, and fulfilling his military obligation on various weekends, Jack learned the value of hard work and time management. After graduating from college (BS in Business Management), he began working as a sales representative for a Fortune 100 company and honed his marketing skills. In 1985 Jack started his financial planning career as an agent with Mutual Benefit Life.  After Mutual Benefit Life ran into financial difficulties, Jack decided to “go it alone”. His company, “Eagles Soar Enterprises, LLC.” successfully grew for almost 30 years. Jack’s skill-set is understanding and recognizing the personal needs of families and business owners. His patience in explaining the numerous options available is greatly appreciated by his clients. Jack agrees that life insurance is a difficult topic and people are rarely “excited” about discussing the subject. When Jack was 23 he witnessed firsthand how important life insurance is when he lost his Dad to cancer. Jack’s Mom used the life insurance proceeds to help minimize the financial loss.  Jack recognizes how critically important proper insurance planning is to the surviving spouse, business partner and, most importantly, the children of his clients. In his free time Jack enjoys playing tennis, horseshoes, ping pong, exercising, reading and attending Philadelphia Eagles football games. Jack has two wonderful children and currently resides in beautiful St. Petersburg, FL. Questions? Call Jack at 1.800.277.3098 or email: info@jackddavis.com

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