A life insurance policy is a contract between you and an insurance company. The contract states that you pay premiums over time, and, in exchange, the company will pay a lump sum amount upon your death to a designated beneficiary. The proceeds from your life insurance policy can help pay your bills and help support your surviving family members’ living expenses.
There are two main types of life insurance policies:
- Whole (or universal) life insurance policies are considered permanent. As long as you pay the premium, the policy is in effect. Whole life insurance policies also have a savings component. This means that you accumulate cash value over the life of the policy. You can borrow money from these types of policies if you need to.
- Term life insurance policies are in effect for a certain period of time, or term. If you have this type of policy and pass away during the term that the policy is in effect, then the insurance company will pay a benefit. If you live past the time that the policy is in effect, the insurance company won’t pay a benefit or give you a refund.
Term life insurance policies are usually less expensive than whole life insurance policies. This is because term life insurance policies only cover a set amount of time. Whole life insurance policies are intended to be permanent. Part of the money you pay is put away for savings.
If you have misplaced a life insurance policy, your state’s insurance commission may be able to help you find it. A policy locator service can search for it for a fee.
If the insurance company knows that an insured person has died, and can’t locate the beneficiary, the company must turn the benefits over to the state’s unclaimed property office.