Life insurance is a subject often thought about but rarely discussed. Mark Hauser is a veteran private equity investor and the co-managing partner at Hauser Private Equity. An experienced professional in the financial realm, Hauser has spent the better part of the past several decades working to improve the financial status of his clients.
Along the way, Mark Hauser understood the importance of life insurance and its complicated nature. Seeking to connect his clients to coverage that can tangibly improve the lives of their loved ones, Hauser broke down the concepts of life insurance to make it easier for everyone.
Life Insurance 101
Life insurance is a heavy subject to discuss because it centers on something rather uncomfortable: losing a loved one. Life insurance policies may be challenging to talk about, but their importance and the impact that they have is hard to ignore.
Life insurance is a legally binding contract between a company and a policyholder. This agreement is predicated on lump sump payments or regular premium payments by the policyholder.
In exchange for these payments, life insurance policies can pay out death benefits to the beneficiaries named in the policy. When an individual passes, their ‘face value’ or ‘death benefit’ is paid to their policy’s named beneficiary or beneficiaries.
Living Benefit Clause
In addition to the conventional life insurance policies, there is an added Living Benefit Clause to be aware of. Mark Hauser explains the Living Benefit clause as coverage for individuals with chronic, terminal, or critical illness. If their policy qualifies, a portion of the overall death benefit is paid out while the insured individual is still alive.
Solvency of Life Insurer
Rarely, an insuring company may become financially insolvent over time. If a company cannot pay out tits guaranteed claims, the state can step in to satisfy the life insurance obligations owed to the policyholder.
Primary Forms of Life Insurance
Now that we understand how a life insurance policy works, we can dig into the two primary forms of life insurance policies available for applicants. Mark Hauser underscored the two different policies while ideating on their differences. The only thing these policies share in common is that they pay out a benefit.
- Term Life Insurance – Term Life Insurance lasts a predetermined set of times before expiring. Along the way, policyholders will submit premium payments to continue coverage. Some policies can be transitioned into a permanent policy.
- Permanent Insurance – Permanent life insurance will differ significantly from term life insurance because it lasts until the individual’s passing. The policy only expires when the holder surrenders it, or they quit paying premiums.