A Broad Definition of Life Insurance

Life insurance is a contract between the policy holder and the insurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment.

In return, the policy holder agrees to pay a stipulated amount (the "premium") at regular intervals or in lump sums. In some countries, death expenses such as funerals are included in the premium; however, in the United States the predominant form simply specifies a lump sum to be paid on the insured's demise.
The value for the policy owner is the 'peace of mind' in knowing that the death of the insured person will not result in financial hardship.

Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot and civil commotion.
Life-based contracts tend to fall into two major categories:
  • Protection policies – designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.
  • Investment policies – where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US) are whole life, universal life, and variable life policies.
There is a difference between the insured and the policy owner (policy holder), although the owner and the insured are often the same person. For example, if Joe buys a policy on his own life, he is both the owner and the insured. But if Jane, his wife, buys a policy on Joe's life, she is the owner and he is the insured. The policy owner is the guarantee and he or she will be the person who will pay for the policy. The insured is a participant in the contract, but not necessarily a party to it. However, "insurable interest" is required to limit an unrelated party from taking life insurance on, for example, Jane or Joe. Also, most companies allow the Payer and Owner to be different, e. g., a grand parent paying premiums for a policy on a child, owned by a grandchild [or vice versa].

The beneficiary receives policy proceeds upon the insured's death. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner can change the beneficiary unless the policy has an irrevocable beneficiary designation. With an irrevocable beneficiary, that beneficiary must agree to any beneficiary changes, policy assignments, or cash value borrowing.

In cases where the policy owner is not the insured (also referred to as the celui qui vit or CQV), insurance companies have sought to limit policy purchases to those with an "insurable interest" in the CQV. For life insurance policies, close family members and business partners will usually be found to have an insurable interest. The "insurable interest" requirement usually demonstrates that the purchaser will actually suffer some kind of loss if the CQV dies. Such a requirement prevents people from benefiting from the purchase of purely speculative policies on people they expect to die. With no insurable interest requirement, the risk that a purchaser would murder the CQV for insurance proceeds would be great. In at least one case, an insurance company which sold a policy to a purchaser with no insurable interest (who later murdered the CQV for the proceeds), was found liable in court for contributing to the wrongful death of the victim (Liberty National Life v. Weldon, 267 Ala.171 (1957)).

I hope this taught you guys some good info about life insurance!

Debt Consolidation - A Broader Definition

After my last post on debt consolidation, I received many e-mails asking me to provide a broad definition of debt consolidation. So today, instead of talking about student loan consolidation, I'm going to discuss debt consolidation as a whole.

Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate, or for the convenience of servicing only one loan.

Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, commonly a house. In this case, a mortgage is secured against the house. The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.

Sometimes, debt consolidation companies can discount the amount of the loan. When the debtor is in danger of bankruptcy, the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.

Debt consolidation is often advisable in theory when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or car may get a lower rate through a secured loan using their property as collateral. Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest.

Student loan consolidation

In the United States, federal student loans are consolidated somewhat differently than in the UK, as federal student loans are guaranteed by the U.S. government.

United States

In a federal student loan consolidation, existing loans are purchased by the Department of Education. Interest rates for the consolidation are based on that year's student loan rate, which is in turn based on the 91-day Treasury Bill rate at the last auction in May of each calendar year.

Student loan rates can fluctuate from the current low of 4.70% to a maximum of 8.25% for federal Stafford-loans, 9% for PLUS loans. Upon consolidation, a fixed interest rate is set based on the then-current interest rate. Reconsolidating does not change that rate. If the student combines loans of different types and rates into one new consolidation loan, a weighted average calculation will establish the appropriate rate based on the then-current interest rates of the different loans being consolidated together.

Federal student loan consolidation is often referred to as refinancing, which is incorrect because the loan rates are not changed, merely locked in. Unlike private sector debt consolidation, student loan consolidation does not incur any fees for the borrower; private companies make money on student loan consolidation by reaping subsidies from the federal government.

Student loan consolidation can be beneficial to students' credit rating, but it's important to note that not all federal student loan consolidation companies report their loans to all credit bureaus.

United Kingdom
In the UK, Student Loan entitlements are guaranteed, and are recovered using a means-tested system from the students future income. Student Loans in the UK can not be included in bankruptcy, but do not affect a persons credit rating because the repayments are recovered from the students future salary at source by the employer before any income is paid, similar to income tax and national insurance contributions. Many students however, are struggling with debt well after their courses have finished

The level of personal debt in the UK has also risen astonishingly in recent years:
"Total UK personal debt at the end of February 2008 stood at £1,421bn. The growth rate increased to 8.9% for the previous 12 months which equates to an increase of £111bn.


In recent years, reports in the media have raised concerns about the use of consolidation loans. The worry is that many people are tempted to consolidate unsecured debt into secured debt, usually secured against their home. Although the monthly payments can often be lower, the total amount repaid is often significantly higher due to the long period of the loan. Debt consolidation sometimes only treats the symptoms of debt and does not address the root problem. In some circumstances, snowballing debt may be a better solution.


Other options available to overburdened debtors include credit counselling, debt settlement, and personal bankruptcy. Some consolidation lenders will renegotiate with the creditors on the debtor's behalf, as a credit counselor does.

Have a great day guys!

Best, cheap health insurance plans

With the public debates over health care still ongoing in the United States, it's clear that universal health insurance is a contested issue.

Even in Canada, which has universal health care, there are problems. Long line-ups, poor coverage, and a shortage of doctors leaves many people without proper health care.

Unfortunately, health-care costs are not going to stop rising. That being said, there are plenty of discount health insurance companies that provide great value.

While our sample region was New York City, the information here is pertinent to people choosing health care all over the country. Check out online insurance providers, like esurance, for more information.

1- Tradition Plus Hospital Program

Monthly cost: $136.85

This health insurance package provides the overall best value for single males. The reason? It's simply a no-frills, essentials plan. Empire Blue Cross Blue Shield is the stable, financial backer to this health care plan. The program is an indemnity plan, which means that you don’t have to worry about whether a certain doctor is in the network. The best part is that there is no deductible. However, that comes at a cost: you don’t have coverage for prescriptions, maternity or office visits. This is simply a good, cheap plan for a single guy who wants to make sure he’s covered in case of an emergency.

2- Full Coverage HMO with no RX

Monthly cost: $288.78

Covered by Atlantis Health Plan, this health insurance package is great for single guys who want good medical coverage without the prescription coverage. If you are a guy who requires no permanent medication, it will be well worth it to pay for your prescriptions only when you need them. However, if you do buy a lot of medication, don't purchase this health insurance plan. Instead, choose a plan that has prescription coverage. 

The HMO (health maintenance organization) part means that you choose one doctor to be your 'family doctor'. This physician will always offer the first diagnosis and recommend a specialist if you need one. Another bonus? This plan offers maternity coverage and coverage for office visits.

3- Full Coverage HMO with RX
Monthly cost: $331.87

Do you use medication? If so, this is a great plan for you. This health insurance package provides solid, all-around coverage at a good price. Like the previous package, it is an HMO plan, meaning you get a doctor dedicated to you and your needs. With this good value health care plan, you will have no deductible, plus you will get maternity and prescription coverage. This is a main thing which sets it apart from the previous health insurance plans. Furthermore, you’ll get help with any office visits.

Things to know before choosing your cheap health insurance plan

You really should assess your needs as an individual. Obviously, if you or your partner is not pregnant, then don't pay extra for maternity coverage. Likewise, if you don’t need medication, then don't pay the extra $50 a month for the prescription premium. Most importantly, don’t just take the first plan that is offered to you: decide what you really need, and customize your plan. 

Also, make sure you learn some important acronyms that designate various plans, like PPO, HMO, EPO, POS, etc. Break down the pros and cons, do a little homework, and make sure you get the best cheap health care plan possible. A little time invested now will more than pay for itself in the long run.