An Introduction To Life Insurance

by Rodney Daniel Bolton

The term Life Insurance refers to an agreement between an insurance provider and the policy holder whereby the policy holder pays a certain amount of money at regular intervals and the insurance provider agrees to pay out an agreed sum of money to the policy holders dependents (usually family) upon the death of the policy holder.

Some countries tend to have funeral costs covered in most of their life insurance policies. In the UK however the general protocol for life insurance is to just have a lump sum paid out to the family of the deceased.

Life insurance policies are legal contracts and the terms mentioned in those contracts describe the events that the insured person will be covered for. There are often circumstances of death that are not covered in a life insurance contract such as war, suicide, riot or civil commotion.

Life contracts usually come in one of two forms, either a protection policy or an investment policy. Protection policies will be fairly standard life insurance policies in that they will require a benefit to be paid to the contracts beneficiaries (usually a lump sum) in the occurrence of an event described in the contract. Investment policies however are used for the growth of capital by regular premiums (payments). Common types are variable life policies, whole life policies and universal life policies.

The term beneficiary refers to the person who will receive the lump sum upon the death of the insured person. Usually the beneficiary can be changed at any time unless an irrevocable beneficiary is appointed. In this case, the beneficiary must grant their permission regarding any changes relating to the beneficiary.

The policy holder and the insured are not necessarily the same person (although they usually are) but someone can take out a policy to cover someone else’s life, for example, a wife could take out a policy on her husbands life, making her the policy holder and him the insured.

In these scenarios, insurance companies want to limit the people who can take out a policy another persons life to only the people who would suffer a genuine loss, emotional or otherwise, if the insured was to die. This is to stop people taking out policies on other peoples lives because this person is on the point of death but its not obvious, and to stop providing a motive to murder. People may consider taking out an insurance policy on someone who is worth a lot of money with themselves as the beneficiary and then proceed to kill that person for the cash reward. Granted this is extreme and a rarity but it had been known to happen before insurance companies clamped down.

As is the case with most general insurance policies, life insurance is a contract between the insurer and the insured where a payment is made to pre-designated parties upon the occurrence of an event covered in the insurance policy, in the case of life insurance, this is usually death.

About the Author:
For more information about life insurance, visit forlifeinsurancequotes.com, an information service for life insurance

Published by: Rodney Daniel Bolton on July 16th, 2009 | Filed under Legal



Leave a Comment

rss feed