Life Insurance
Life insurance is a contract between the policy holder and the insurer, where the insurer promises to pay a designated beneficiary a sum of money (the “benefits”) upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. In return, the policy holder agrees to pay a stipulated amount (the “premium”) at regular intervals or in lump sums. In some countries, death expenses such as funerals are included in the premium; however, in the United States the predominant form simply specifies a lump sum to be paid on the insured’s demise.
The value for the policy owner is the ‘peace of mind’ in knowing that the death of the insured person will not result in financial hardship.
Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot and civil commotion.
Life-based contracts tend to fall into two major categories:
* Protection policies – designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.
* Investment policies – where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms are whole life, universal life and variable life policies.
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Life Insurance Benefits
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 (and typically notarized).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 a lump sum or as an annuity, which is paid over time in regular recurring payments for either a specified period or for a beneficiary’s lifetime.
If anything was to happen to you, having life insurance enables you to look after your family financially when you are gone. Making sure that you’re home is paid for and your families welfare taken care of.