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IOA’s John Ritenour teaching you about Life Insurance

Life insurance is a contract between a person and a company, such as an insurance company or mutual association. The insured is paying for a piece of life insurance and agrees to pay over a set period of time. The insurance company oversees the administration of the policy during the lifetime of the insured and determines when the insured receives an annuity payment to make payments to beneficiaries. With the Annuity, for instance, the insurance company will provide the insured with an annuity payment. John Ritenour: The insured must wait until they die to receive the income. This is often referred to as a life settlement because the insurance company typically takes out a large amount of money and provides the remaining sum to the insured’s heirs.

What is the Purpose of Life Insurance?

Every policyholder has a different purpose in mind for an insurance policy. Some policies are “just in case”—essentially, a safety net to help with the costs of unexpected expenses. Others are designed to benefit the policyholder when an untimely death occurs. John Ritenour: Policyholders often purchase life insurance in a traditional manner by going to a life insurance agent or by purchasing directly from a life insurance company. However, life insurance is a specialized insurance product. To assist in making an informed decision about the right kind of life insurance, we offer the following life insurance basics.

How Policies Matter

Traditional life insurance policies take the form of annuities. When a policyholder dies, the annuity’s premium is paid out to his or her heirs. Annuities can be helpful to people who do not have access to other forms of income and wish to secure a source of income in the event of an unexpected event. But because an annuity’s income is based on the length of a policy’s duration, it can become more expensive to continue purchasing coverage as life expectancy increases. John Ritenour: A younger person with good health might take advantage of a longer policy’s duration and purchase more coverage than the average insured.

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