“Insurance in simple words” FAQs about life insurance Q1-Can the insurance company not pay the death benefit to the beneficiary? Answer: Insurance companies check the health condition through the medical tests and background check from the family doctor when people ask for insurance. If there is no mis-representation and the tests show the healthy condition and ultimately the policy is issued, the insurance company will pay the death benefit to the beneficiary if the death occurs, however, there is an exclusion. If the person dies due to the suicide within the first two years, the insurance company will not pay the death benefit to the beneficiary. Q2- If somebody owes to banks and financial companies, is this amount deducted from the death benefit? Answer: No. The death benefit (face amount) will be paid completely to the beneficiary even if the insured person has debts to those creditors. The face amount is tax sheltered and will be paid to the beneficiary right after the death without pass probate process Q3- Is there any life insurance policy with the investment plan? Answer: Yes. Universal life and whole life insurance policies have an investment plan which the insured can use part of it as the “cash value” even when they are alive. The investment is controlled by the insured in universal life policies, while the insurance company has control over the investment in whole life insurance policies. Q4- Is it true that we will lose all premiums we paid and ultimately only the face amount is paid? Answer: Universal life and whole life insurance policies have investment vehicles. The face amount can be increased if the premium is high enough to make a good growth in the “cash value”. Term life insurance policies do not have investment plan, therefore, there is no “cash value” and the face amount, paid to the beneficiary would be the same as the face amount in the policy contract
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