Mother Life Insurance Policy | Life Insurance

 Mother  Life Insurance Policy

Life insurance companies will not sell a life insurance policy to you unless you have an insurable interest in the life of the person you are insuring. An insurable interest means that you stand to suffer a personal loss if the insured person dies. Generally, this means that your mother can take out a life insurance policy on you.

  Types

o    There are two types of life insurance your mother could take out on you. The most basic kind is term life insurance. Term insurance provides a basic death benefit that remains the same for the life of the policy. Permanent insurance offers life insurance that lasts until age 100 or more. Permanent insurance may also offer a cash-value savings that can be used by your mother during your lifetime. The cash value savings is a cash reserve that builds against the death benefit of the policy.

Significance

o    Your mother can use your health to qualify for a life insurance policy that she owns and controls for her own benefit. If it is a cash-value policy, she can use the cash-value savings and invest the premiums any way she chooses. Cash-value policies sometimes offer the option of investing premiums into mutual funds or various other interest-bearing strategies designed to grow the cash value of the policy. As the cash value grows, so does the death benefit. The cash-value account is the savings portion of a permanent life insurance policy. Cash values can be borrowed against or withdrawn from and used in any way your mother sees fit throughout your lifetime. In essence, your mother will have control over all aspects of the policy.

Benefits

o    Taking out a life insurance policy on you is beneficial for your mother because it allows her to use those cash-value savings to supplement her retirement when she may not qualify for the insurance herself or when premiums would be too high and cash-value growth would be too low or slow based on her age.

Drawbacks

o    The disadvantage to having your mother take out a life insurance policy on you is that your mother owns the policy. By owning the policy on your life, you submit to a health exam but have no control over the policy.

Considerations

o    Consider why your mother wants to purchase life insurance on you. You can always refuse to allow your mother to take out a policy on you because she will need your consent

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