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Life insurance
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Life insurance is basically a contract between an insurer who is the policy giver and the insured who is the policy holder. The insurer promises to pay a fortune to the insured upon his/her death in exchange of agreed premium payments from the client. The contract which is negotiable depends on other external factors that influence payment such as the current health conditions of the individual, particularly on issues to do with terminal illness.
These contracts are legally binding with written specifics concerning the limitations and extensions of liability on the insured events. The liability of the insurer may be limited in cases such as suicide where the contract may be ruled null and void. Such special exclusions will wholly depend on the time agreement between the two parties or the statutes of the locality where the contract was enforced.
Mortality tables are used to calculate policy prices given by the insurer with keen actuarial studies on probability of death occurrences and statistics. Some of the variables also used by insurers are gender and age. Age indeed is considered an important variable of interest as rates rises with age.
In an event of the death of the insured, the claim can only be settled upon provision of an authentic death certificate as objective evidence with additional investigations by the insurer on the cause of death. When all these are proved, the insurer will now have an obligation to settle the claim with the beneficiaries, either on annuity payment or lump sum.
Types of life insurance
Life insurance policies may either be temporary or permanent. Temporary provisions are those that cover up to an agreed period while permanent are those that remain active throughout the policy holder’s life unless defaults in payments of premium occur; where your cover will be terminated with no refunds. Under temporary and permanent, life insurances is also divided into the following subclasses: universal, endowment, term and whole life insurances.
Universal life coverage is a permanent coverage with flexible premium payments and death benefits. Flexible death benefit is where the insured can chose to reduce or increase the death benefit. This cover is also less expensive when compared to whole life policy.
Endowment life insurance is a cover linked to an agreed age known as the endowment age. The value of the policy is equated to benefits on death at a certain age. Endowments are temporary and are paid out at the specified age whether the policy holder outlives or dies. Compared to whole life or universal life, endowments are expensive due to the shortened periods.
Term life insurance offers a cover to a specified period with factors such as length of cover, premium to be paid and the lump sum amount, taken into great account. Term life insurance can also be renewable depending on agreements.
Whole life cover is a permanent life cover with benefits provided at death. The premiums payments are constant throughout depending on earlier quotations at the onset of the contract. This policy accumulates your cash reserves from investments made by the insurer using your premiums. The interests from these investments can be used to settle your remaining premiums or be reinvested upon your consent. When compared to term, payment of benefits in this policy occurs upon regardless of age.
Despite the lack of efficacy in claim settlements by some insurers or breach of contract upon complexities, life cover is an investment worth taking to financially protect your loved ones in your absence.
References.
Maclean, J. B. (1962). Life insurance (9th Ed.). New York: McGraw-Hill.Steuer, A. (2010). Questions and answers on life insurance: the life insurance tool book (3rd Ed.). Alameda, CA: Life Insurance Sage Press.
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