Life insurance is a contract for payment of a sum of money to the person assured (or failing him / her, to the person entitled to receive the same) on the happening of the event insured by the contract
-Life Insurance or Life assurance is a contract between the policy owners and the insurer, where the insurer agrees to pay a designated beneficiary a sum of money upon the occurrence of the insured individuals or individuals’ death or other event, such as terminal illness or critical illness.
-In return, the policy owner agrees to pay a stipulated amount at regular intervals or lump-sums.
Life insurance helps in two ways:
- Premature death which leaves dependent families to fend for itself.
- Old age without visible means of support.
Advantage of life insurance
Superior to any other savings plan
Encourages and forces thrift Easy settlement and protection against creditor
Administering the legacy for beneficiaries
Ready marketability and suitability for quick borrowing
Disability benefits
Accidental death benefits
Tax relief
Difference between the Insured and the policy owner:
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 ex: Mr. ‘M’ buys a policy on his own life, he is both the owner and the insured
But if Ms. ‘K’, his wife, buys a policy on Mr. ‘M’s life, she is the owner and he is the insured.
Contract terms:
Special provisions may apply, such as suicide clauses where the policy becomes null if the insured commits suicide within a specified time (usually two years after the purchase date; some states provides a statutory one – year suicide clauses)
Special provisions may apply, such as suicide clauses where the policy becomes null if the insured commits suicide within a specified time (usually two years after the purchase date; some states provides a statutory one – year suicide clauses)
Any misrepresentations by the insured on the application are also grounds for nullification
The face amount on the policy is the initial amount that the policy will pay at the death of the insured or when the policy matures, although the actual death benefit can provide for greater or lesser than the face amount.
Death proceeds:
Upon the insured’s death, the insurer requires acceptable proof of death before it pays the claim.
The normal minimum proof required is a death certificate and the insurer’s claim form completed, signed.
If the insured’s death is suspicious and the policy amount is large, the insurer may investigate the circumstances surrounding the death before deciding whether it has an obligation to pay the claim.
Proceeds from the policy may be paid as lump-sum or as an annuity, which is paid overtime in regular recurring payments for either a specified period or for a beneficiary life time.
