Legal Definitions - regular life policy

A regular life policy, often referred to as a whole life or permanent life insurance policy, is a type of insurance that provides coverage for the entire duration of the insured person's life, as long as premiums are paid. Unlike term life insurance, which covers a specific period, a regular life policy typically includes a savings component known as cash value. This cash value grows over time on a tax-deferred basis and can be accessed by the policyholder during their lifetime, for example, through loans or withdrawals. Upon the insured's death, the policy pays a predetermined sum, known as the death benefit, to the designated beneficiaries.

Here are some examples illustrating how a regular life policy works:

• Family Protection and Long-Term Savings: Maria and David, a couple with two young children, decide to purchase a regular life policy for each of them. Their primary goal is to ensure their children would be financially secure if either parent were to pass away unexpectedly. They also appreciate that the policy builds cash value over time. Years later, when their eldest child is ready for college, they consider taking a loan against the policy's cash value to help cover tuition costs, knowing they will still have lifelong death benefit coverage in place for their family.

  This illustrates a regular life policy providing both a guaranteed death benefit for lifelong family protection and a living benefit through its accessible cash value component for future financial needs.

• Estate Planning and Wealth Transfer: Mr. Henderson, a successful business owner in his 60s, wants to ensure that his estate has sufficient funds to cover potential estate taxes and to leave a substantial inheritance for his grandchildren. He purchases a regular life policy with a significant death benefit. Upon his passing, the payout from this policy goes directly to his beneficiaries, providing liquidity to his estate and fulfilling his desire to leave a legacy without his heirs having to sell other assets.

  This illustrates how a regular life policy can be a powerful tool in estate planning, providing a guaranteed sum to beneficiaries to cover expenses like taxes or to transfer wealth across generations.

• Business Succession Planning: Sarah and Emily are partners in a thriving architectural firm. They want to ensure the business can continue smoothly if one of them were to die prematurely, without placing a financial burden on the surviving partner to buy out the deceased partner's share. They each take out a regular life policy on the other, with the firm as the beneficiary. If Emily were to pass away, the death benefit from the policy on her life would provide Sarah with the necessary funds to purchase Emily's share from her estate, allowing Sarah to maintain full control of the business and ensuring Emily's family receives fair compensation.

  This illustrates the use of a regular life policy in a business context, providing financial stability and a mechanism for business continuity in the event of a partner's death.