Understanding different types of life insurance policies


There are a number of different types of life insurance policies. Following the death of a spouse, widows and widowers who are the beneficiaries of any life insurance policies their spouse held, are eligible to receive proceeds from those policies. Below are few of the most typical forms of life insurance.

Individually owned policies
Your spouse may have owned one or more permanent (e.g., whole life) or term life insurance policies. These policies are purchased by one person and pay benefits when the insured person dies. If you’re not sure if your spouse owned a policy and your agent can’t find one, check credit card statements, canceled checks, or tax statements, looking for evidence of premiums paid.

Group policies
Group life insurance policies provide coverage to many people under one policy. These policies may be issued through an employer, bank, credit agency, or other professional or social organization, and often pay benefits in specialized circumstances.

Employer-based group life insurance
If your spouse was employed at the time of his or her death, you may be the beneficiary of a life insurance policy issued through his or her employer. If you’re not sure if your spouse had group life insurance, check pay stubs or call their employer.

Accidental death and dismemberment policy
These policies pay benefits if an insured individual dies accidently. Occasionally, these policies are offered as part of a loan package, issued as a free benefit by banks or as part of an employer-issued insurance policy.

Travel accident insurance
If your spouse was killed while traveling by air, boat or train, you may be eligible to receive the proceeds from a travel accident insurance policy he or she may have purchased when buying tickets. If your spouse used a credit card to purchase travel tickets, you may be automatically entitled to a life insurance benefit payable if he or she died as a result of an accident when using those tickets. Some travel agencies and road and travel clubs also routinely issue travel accident insurance policies, and employers sometimes pay death benefits to employees who are killed while traveling on company business

Mortgage life insurance
A mortgage life insurance policy pays off the balance of the policyholder’s mortgage at his or her death. If you’re not sure whether your spouse purchased such a policy, check with the mortgage lender.

Credit life insurance
Banks routinely offer credit life insurance when someone takes out a loan or is issued a line of credit. This insurance will pay off the outstanding balance of a loan or account if the insured individual dies. A few extra dollars is added to the monthly loan payments to pay these premiums. Because it is so profitable for the bank, most institutions try to sell this type of policy when someone finances a purchase or signs up for a line of credit, and occasionally they add it to a contract before the individual signs it. Thus, it is likely you won’t find out that your spouse owned such a policy unless you check with credit card companies, banks, or any lenders to whom your spouse owed money at the time of his or her death.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.

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