Life insurance is a term that refers to a contractual agreement between a policy holder and an insurance company wherein the insurance provider agrees to pay out an agreed sum to the designated beneficiaries of the policy (usually the insureds family) upon the insureds death for a predetermined regular fee.
In some countries, insurance companies have been known to include catering costs for the funeral in their policy agreement, but in the UK the main form of life insurance agreement is to simply have a lump sum paid to the specified party upon the demise of the insured person.
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 based contracts will usually fall into two different categories, protection policies and investment policies. Protection policies are those that provide a benefit to those parties specified in the contract, usually a lump sum, in the event of a specified scenario. Investment policies are where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US anyway) are whole life, universal life and variable 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.
Although the policy holder and the insured are usually the same person, they are not always. For example, if a man takes out life insurance on his own life, then he is the policy holder and the insured, and this is usually how it works. However, if his wife takes out the policy on his life, then she is the policy holder and he is 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.
Life insurance, like most other types of insurance is basically an agreement between the insurance provider and the insured that for a recurring fee, the aforementioned beneficiary/beneficiaries of the policy will receive the proceeds of the contract (usually a lump sum) upon the occurrence of one of the terms of the contract, in the case of life insurance, this will usually be the insureds death.
In some countries, insurance companies have been known to include catering costs for the funeral in their policy agreement, but in the UK the main form of life insurance agreement is to simply have a lump sum paid to the specified party upon the demise of the insured person.
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 based contracts will usually fall into two different categories, protection policies and investment policies. Protection policies are those that provide a benefit to those parties specified in the contract, usually a lump sum, in the event of a specified scenario. Investment policies are where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US anyway) are whole life, universal life and variable 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.
Although the policy holder and the insured are usually the same person, they are not always. For example, if a man takes out life insurance on his own life, then he is the policy holder and the insured, and this is usually how it works. However, if his wife takes out the policy on his life, then she is the policy holder and he is 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.
Life insurance, like most other types of insurance is basically an agreement between the insurance provider and the insured that for a recurring fee, the aforementioned beneficiary/beneficiaries of the policy will receive the proceeds of the contract (usually a lump sum) upon the occurrence of one of the terms of the contract, in the case of life insurance, this will usually be the insureds death.
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