Introduction
Unfortunately, there are innumerable accidents and mishaps that happen each day. But human spirit is such that we still carry on with life and insurance is a good way to help people build back their lives after an unlucky event. This article is a basic guide to life insurance and why and how you should invest in it.
History
Life insurance is very simply a contract between the holder of life insurance and an insurer, which reads in its very basic form that the insurer will pay the life insurance beneficiary a sum of money on the death of the person who is insured. The contract can take many forms and life insurance can be invoked in cases of terminal illness as well.
As this is a legal contract, there are some common exceptions included where death will not result in payment, such as in cases of suicide (some states provide a compulsory statutory one year suicide exception clause), war, riot etc, and life insurance is also nullified in cases of misrepresentation by the party that wants to be insured. The policy matures after a person’s death, or after a person reaches a specified age.
The policy holder has, in turn to pay a premium which is paid either in instalments or as a lump sum, and life insurance has the benefit that the person insured can rest be assured that his of death will not result in financial hardship for his/her loved ones. For the payment of the life insurance benefit, the insurer company will require a certificate of death as proof and a claim form which has been duly completed by the claimant.
It happens when the circumstances of death are suspicious and life insurance did not encompass them, or when the amount to be paid is very large, that the insurance company will want to investigate into the matter before paying what it has promised in the contract.
Features
There are many types of life insurance and each caters to a specific audience: The two broad categories are permanent life insurance and temporary life insurance.
Permanent life insurance remains in action till the policy matures, unless the owner fails to pay the premium when due. The policy cannot be cancelled by the insuring company for any reason except for fraudulent application and any such cancellation must occur within a period of time defined by law (usually two years by statute). There are four sub-classes to permanent life insurance and these are whole life, universal life, limited pay and endowment policies. You should talk to your insurer and ask for details of all plans offered by them to make an informed decision.
Tips and Comments
There are other types of life insurance and some of these are less expensive than permanent life insurance. One example would be accidental insurance policies, which are limited to payment of benefits only in case the insured should pass away after meeting with an accident. Accidents include an array of injuries, but do not usually cover injuries aggravated due to health problems.
