Life Insurance—An Overview
In today’s world where there exist all kinds of insurance policies, the best kind of insurance that one could get would be the one that provides for his family should something unexpected happen to him. This is the life insurance plan. This insurance scheme is an agreement between the insurance company and the policy owner that the former pays a stipulated amount of money to the latter’s family in the case of his death. The insured, in return, makes regular premium payments to the insurance company.
The insurance company will not give the money upon the insured’s death to just about anyone in the family though. The money will only be given to the beneficiaries stipulated in the life insurance contract should an event that has been covered by the contract occurs, called insured events. Aside from normal or accidental death, other insured events include the diagnosis of a critical or terminal illness, partial or permanent disability because of an ailment. Other events could be covered by the life insurance policy depending on the contract of agreement with the insurance company.
Aside from the coverage, it’s also best to know that there are also certain limitations that will be set in the contract that an insured should look into very closely. The contract will have particular exclusions meant to extend the liability of the insurance company to only a certain point.
There are two major categories of life insurance policies and these are the investment and protection policies. The main purpose of an investment policy is to assist capital growth of the insured’s investment through his payment of premiums either regularly or in one single large amount. The protection policy, on the other hand, is planned on the provision of a benefit should an event specified in the contract occur. The benefit claimed is usually paid by lump sum.
A life insurance policy also has special provisions included in the contract. The most common provision is the suicide clause wherein the contract will become null and void should suicide be committed by the insured within the time specified in the policy. Commonly this specified time runs until two year after the purchase of the policy.
Those who are planning to buy a life insurance policy should also be very truthful in filling out the application forms provided for the policy. If found that you deliberately left out an important factor that might be needed later in determining the payment of a claim, your contract could also be nullified. Usually contracts stipulate that the insurance company could still contest the viability of a claim and could ask for more information before they decide on a claim payment or denial. If the insured should expire within the contestability period of two years, this provision could be used by the insurance company.
Actuary calculations based on mortality tables on average life expectancies often determines the cost of a life insurance policy. Professionals employing actuarial science based on probability and statistical mathematics, actuaries base their tables on the tobacco use, age and gender variables of the general population. Used as an insurance cost baseline, these tables are used simultaneously with the family history and the health of a potential policy buyer in the determination of how much premium payments should be made as well as his insurability.
by Maria-Goldsmith 19 years ago