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Five Reasons Which Are Not a Reason For Buying Life Insurance on the Life of Someone Else
One question that many people have asked is which of these is not a reason for buying life insurance, and the answer to this question might surprise you. You see, before we answer that question we need to first explain what life insurance is. So, let us begin by answering the question: "What is life insurance?"
Life insurance is a contract between an individual or an institution and the person that they insure. In exchange for paying premiums (which can vary depending on the company that you are dealing with), the insurance company will pay the death benefit when the insured passes away. This is done in exchange for something called an interest payment. This is the amount of money that you would owe the company if you died. In essence, when you buy life insurance you are paying the company to replace your death benefits should you die. This is why many people believe that it is not a valid reason for buying life insurance on the life of someone that they love.
But what if you are simply buying life insurance on the life of someone else? Shouldn't buying it is a legitimate reason? The answer to this question may surprise you, but it is a very legitimate one. There are linkedin out there that are very lonely, and do not have anyone to depend on, even though they may have paid all of their bills and looked forward to their Golden Years. So, while looking at whether or not life insurance is a reason for buying life insurance on the life of someone else, think about these 3 things:
The first reason that is often brought up as a reason for not buying insurance is because it is unlivable. However, just because it is unlivable does not mean that it is a reason not to purchase it. It can be made very easily to be so. Simply buy a policy in the name of one person that is in your family, and have them pay the premium. Then have the "dead" person's estate purchased by the insurance company at the same time that you are making the purchase.
The second reason, which is not a reason for buying life insurance on the life of someone else is that it will be a waste of money. While you can often times find life insurance premiums that are extremely affordable, it is not very common to find policies that are affordable and still provide adequate coverage. The truth is that the majority of people that buy policies with low premiums usually end up having to pay much more than they would if they had simply purchased a policy at the normal premium rate for their age and sex. If you are young and healthy, it may make sense to purchase life insurance on the life of someone else, but once you start getting into your older years, the rates will no longer be affordable, and it is certainly not a good idea.
The third reason, which is not a reason for buying life insurance on the life of someone else is that it is against federal law to do so. There are many different laws in place regarding life insurance, and the purpose of these laws is to prevent fraud. In order to obtain life insurance, it is required that you first undergo a medical exam. When you ask whether or not it is a federal crime to knowingly lie about your medical history to obtain life insurance coverage, the answer is yes. Each individual state has their own laws regarding this, but the basic principle is that if you are lying about something related to your health in order to obtain coverage, then you are committing a federal crime. Even if you are doing it because you don't want to pay the higher premiums for life insurance, or just do not want to spend the time to go through the medical requirements, if you are lying about something that could get you in trouble with the law, you are breaking the law.
The fourth reason, which is not a reason for buying life insurance on the life of someone else is that there really is no need for it. Life insurance is not like a loan, and if you are not going to be around to pay the monthly payment on the policy, then there is no point in pursuing the idea. If you run into financial trouble and need to take care of unexpected costs, life insurance will not pay those bills for you. It only pays those expenses when you have actually earned them. So if you are running on empty, or just generally lack the funds to pay your bills every month, then it makes no sense to pursue purchasing life insurance on someone else's life.
The fifth reason which is not a reason for buying life insurance on the life of someone else is that it would be incredibly difficult to do. To sign up and purchase life insurance, you would have to meet very stringent requirements. First, you have to meet and be accepted by all of the major health insurance companies, all of which are unlikely to approve of your request due to the very specific requirements which they require of consumers. Second, you would have to fill out a very specific paperwork, which would involve a great deal of information about you, your finances, and your death plans. Third, there are very strict underwriting procedures which take place, and which would likely reject your application based on those facts. Finally, once you get your policy, you have to keep paying it in full, or risk losing it, so it really is not worth it.
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