Life Insurance – How Does It Help?
Many insurance companies offer a life insurance policy. In fact, this is the most elementary type of insurance policy. The policy aims at securing the future of your family in event of your death. The principle defining this type of a cover is quite simple to understand; you purchase a policy and pay premiums at regular intervals. In the event of your death, a lump sum amount is handed over to your beneficiary.
A life insurance policy can be purchased for self or for someone else. Typically, life insurance mandates some sort of agreement between three parties – the insured, the insurer and the owner. The person whose life is being insured is referred to as the ‘insured’. The insurer is nothing but the insurance company. The owner is the person who actually buys the policy. The owner and the insured could be the same or they could be two different people. If you were to purchase a policy for self, then you would be the owner as well as the insured. If, however, you buy it for your partner, then the partner is the insured person and you are the owner. If you are the owner of a policy, it is your responsibility to pay premiums at regular intervals.
A life insurance contract involves another important member – the beneficiary. A beneficiary is the person who benefits from the death of the insured – the lump sum amount becomes payable to him or her in event of the death of the insured person. There are two types of beneficiaries, the irrevocable one and the revocable one. The revocable beneficiary can be changed at the will of the owner while the irrevocable one cannot be changed unless and until the permission of the beneficiary is sought.
A life insurance policy is subject to many terms and conditions. Most policies will come along with certain exclusions. Exclusions are certain conditions, which, if satisfied, will absolve the insurer from making any payments that would otherwise have been made. In most of the policies, suicide in the first two years of the policy term is not covered.
In the first two years of the policy period, often referred to as the contestable period, the insurer reserves the rights to make an immediate pay out. In event of death of the insured, the company may stop payment and conduct investigations of its own. These investigations aim to ratify the cause of death. If it is discovered that death was deliberate or a result of homicide, then the insured is relieved from paying the lump sum amount.
The amount to be handed over to the beneficiary is known as the face amount. This is usually paid in the event of the death of the insured is the attainment of a certain age by the insured. This date, when the amount becomes payable to the beneficiary is known as the maturity date. A life insurance policy is more often than not, a sort of protection for the spouse of the insured in event of his or her untimely death. To purchase an insurance policy, the owner of the policy must have an insurable interest. Insurable interest is a reason to secure the life of a person. Insurable interest is an important consideration that determines the unassailability of a policy especially when the owner and the insured are not the same. In the absence of the same, a policy is declared as invalid.
When a person dies, a solid proof of the cause of the death has to be handed over to the insurance company in order to claim the policy benefits. In most cases, a notary’s signature on the death certificate is an accepted form of proof. The benefit could be paid in one go or an allowance that is paid at regular intervals. This guarantees the beneficiary some sort of monthly income for the rest of his or her life.
There are two types of insurance policies, the temporary one and the permanent one. The temporary insurance or the term life is a cover that insures a person for a fixed period. For instance, a 20-year term life insures a person for a period of 20 years. There are two types of permanent insurance policies: the whole life and the universal policy. In the whole life policy, the person has to co0ntinue paying premiums, never mind how long he lives. If he passes away, the payout will be done at whatever age. The Universal policy is a bit more flexible with more flexibility in the payment of premiums. So it would be best to ask an expert for advice as to which would be best suited for you.