Life insurance is a contract between an insurer and an insurance policyholder. The insurer promises to cover a designated insured person a specified amount of money in the event of their death, with the payment made to the insurance policyholder. Depending on the contract, certain events like critical illness or terminal disease can also trigger premium payment. But the insurer must only do this if they believe the person will die within the given period. There are different types of life insurance policies available, and depending on the needs of the policyholders, the kind of insurance policy chosen may vary.
Usually, there are two parties in Life Insurance Policy transactions, the insured and the beneficiary. In the case of a joint policy, both the insured and the beneficiary are listed in the policy. If only one certified and the beneficiary is not mentioned in the agreement, the insured’s name can be said to be the beneficiary. The term beneficiary refers to the person who will receive the payment upon the demise of the insured.
Premium payments are generally based on the age of the insured. Therefore, if one of the insured dies early, the beneficiary will not receive any premium payments. For people who wish to have a named beneficiary for their life insurance policy, it is customary to include this in the agreement. However, life insurance companies allow the named beneficiary to be listed elsewhere in the policy, which is usually at the discretion of the insurer.
Premiums for this type of policy are paid according to the risk of loss that is expected from the named beneficiary. If the insured has a high-risk profession (high mortality rate), the premium payments would be high. This is because the insurance company expects the insured to live long enough to make monthly premium payments. High premiums are also applicable for people who smoke. This is because the risk of death from smoking is very high.
Most insurance policies provide that the policyholder should make an attempt to improve his or her health conditions. This improves the likelihood of the beneficiary getting his or her payment when the policyholder dies. This is referred to as the dividends in insurance policies. Policyholders are usually required to take regular medical examinations.
Some insurance companies require that a certain lump sum amount is paid by the policyholder before the death benefits are received. The reason for the requirement is to ensure that there will be some money available to the family of the insured upon his or her demise. In some cases, companies may choose to pay the entire benefit upon death instead of paying out a lump sum. However, it is important to note that this is at the discretion of the insurance company. They are only obligated to do this if the entire sum has been determined through a life expectancy table.
One of the most important reasons why term life insurance provides such low premiums is that term life insurance provides a relatively low profile. Policyholders do not receive a large amount of notice and there is no investment component associated with these policies. When an insured passes away, his or her dependents will receive the outstanding balance on the policy. This does not mean that the premium payments will never increase. Most insurance companies allow their policyholders to increase the premium payments as they get older.
People who buy policies with lump sum amounts are advised to set aside a lump sum for investing purposes. This way, they will have a ready cash investment when they pass away and their beneficiaries will receive the entire outstanding balance upon the policy holder’s death. With this type of insurance policy, the policyholder is financially protected if he or she should die during the specified term of the policy.