Just What Is ‘Life’ Insurance?

by Bob Bisceglia, National Sales Director, William Penn Association

There has always been a certain stigma surrounding the words “life insurance.” For some, those words trigger a fear of the unknown, while for others, they cause them to turn away and say “blah!” In this issue, I hope to alleviate that stigma, calm those fears and show why owning life insurance may be in your best interest. First, let’s discuss just what a life insurance certificate is: 

• A life insurance certificate is a contract between the insured (you) and the insurer (us).  

• A life insurance contract is a promise made by an insurance company (us) to provide the insured policyholder (you) with a certain value at some point in the future, in exchange for a monthly, annual or one-time premium payment. That value, or promise to pay, could be in the form of a cash value build up that can be used during your lifetime, or it could be a “lump sum” benefit that is paid to your heirs at the time of your death. Earlier in my career when people would ask me what I did for a living, I was taught to respond: “we provide funds for future delivery!” 

There are a number of parties involved in a life insurance contract:

• The insurer. A licensed insurance carrier that provides the products, sets the rates and determines the values of the contract.  

• The policy or certificate owner. This is the person (or entity) that owns the policy. This may or may not be the same person as the insured. A parent, for example, might be the owner of a policy on their minor children until they reach a certain age. The policy owner maintains all policy rights to the contract, such as the ability to make changes, access the living values and change the beneficiary.  

• The insured. This is the person whose life is insured.  

• The beneficiary (or beneficiaries). This is the person (or persons) who will receive the death benefit of the contract when the insured dies. The beneficiary has no policy rights prior to the death of the insured. It’s usually a good thing to name both a primary (first) as well as a contingent (secondary) beneficiary to the contract, in case the primary beneficiary dies first. The beneficiary can use the proceeds for whatever purpose they wish. Although not contractually obligated to do so, the beneficiary would typically use the death proceeds to pay for the funeral and other final expenses of the insured. 

Up to this point, we have been discussing the nuts and bolts of life insurance, describing and defining the parties to the contract. That’s the stuff that makes you turn your head and say “blah!” Now, let’s shift gears and talk about how this stuff works in real-life situations and explore the magical, relevant and ecstatic aspects of life insurance: 

• Life insurance solves an overwhelming financial problem at death. When a person dies, their income stops. Even for a retired couple, the income from their Social Security and possibly the pension of the deceased person may also stop or be drastically reduced. Anyone that is dependent on the deceased--even for a small amount of income or support--will suffer financially without their support.  

• Just about the time that unpaid bills start to pile up, and the grieving family is under a lot of financial stress, the life insurance death benefit arrives, providing funds needed to meet ongoing financial obligations.  

• The life insurance benefit appears just in time to help the heirs pay for the funeral and other burial and final expenses of the deceased. 

• Life insurance proceeds provide funds that can be used by beneficiaries to cover: mortgage, rent or utility payments; childcare expenses; college expenses; car and other loans; and food, clothing and everyday living expenses. Just what is ‘life’ insurance? 

• Life insurance provides peace of mind. You will rest easier knowing that your loved ones will be taken care of because you cared enough to purchase life insurance.  

Wow, life insurance can do all of that? YES! But wait, there’s more! We talked about the “living benefits” of life insurance, what does that mean? I’m glad you asked. 

The cash value build up in an ordinary (whole) life plan can be used: 

• As an emergency fund in the event of a disability, job loss or other unforeseen event. 

• To help offset college expenses. 

• To start or maintain a family business. 

• To supplement retirement income.  

• To pay for a wedding. 

Early in my career--very early, actually--one of my first sales was to a close friend, Russell. Russell was a single guy who decided to purchase a small starter policy. He purchased a $10,000 ordinary life policy with a $25,000 term rider attached, which would give him the protection he needed now and the ability to “convert” the term portion to a permanent life policy somewhere down the road. His monthly premium was around $30 per month.  

Little did I know when delivering his policy that, in addition to being one of my very first clients, Russell would also become my very first death claim. He died in an auto accident just six months after purchasing the insurance. His family could not believe he had the foresight to purchase life insurance and were truly amazed when I delivered a check for $35,000 to their home not more than two weeks after the funeral. Russell had paid a total of $180 in premiums, and I delivered a check for $35,000. That, my friends, is what we call the miracle of life insurance. 

No other financial product delivers the same economic impact as life insurance. Annuities don’t. IRA’s don’t. Stocks and bonds don’t. Real estate doesn’t. Only life insurance delivers funds for future delivery to your heirs and at the best possible value. Are you ready to unleash the miracle of life insurance on your family? 

Call your WPA agent today to get a quote on the valuable insurance coverage you and the members of your family need. Then you’ll have the peace of mind that comes with knowing that you’re taking care of your loved ones.