Zero Payment Life Insurance

NO PAYMENT ON LIFE INSURANCE?

Supposedly, there are companies offering to pay your life insurance premium. What a deal, huh.

In this arrangement, you apply for life insurance and agree to give the vast majority of the death benefit to a third party company. It is essentially an investment to them.

For example: you buy a $30,000 life policy (likely a whole life) and at your death your beneficiary receives $10,000 or so. In return you pay no premiums. The company who has been paying premiums owns the policy and the remainder death benefit.

It is unclear if any Department of Insurance will approve such an arrangement or any insurance company for that matter. Typically there has to be insurable interest, which means someone has a vested interest in your death, other than simply owning your life policy.

There is one way around the above arrangement, if an insurance company or Department of Insurance does not approve this type of relationship. Any insured can change their beneficiary after a life policy has been approved. It is during the underwriting process that the insurance company can have say in who may be a beneficiary.

You should consult an estate planning attorney before agreeing to such a partnership, however. You need to find out whether this life policy under this arrangement will affect you in any way when it comes to estate taxes or in any other related way.

Always, you need to feel comfortable with your agent. If not, continue shopping around.

Gary Brown is principal owner of Choice Insurance of Arizona. He has been serving Arizona residents for car insurance and home insurance for nearly 14 years. Find his website at Insurance Phoenix