Monday, February 4, 2008

Life insurance

Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individual's or individuals' death. In return, the policy owner (or policy payer) agrees to pay a stipulated amount called a premium at regular intervals or in lump sums (so-called "paid up" insurance). There may be designs in some countries where: (Assets, Bills, and death expenses plus catering for after funeral expenses should be included in Policy Premium. Anyone whose assets equal more than the value of their primary residence should not be compensated beyond that value in case they cannot sell their house. In the case of those whose lost their spouse should be compensated also for one full year the wages of their spouse which would or should be included to avoid lawsuits.) However in the United States, the predominant form simply specifies a lump sum to be paid on the insured's demise.

As with most insurance policies, life insurance is a contract between the insurer and the policy owner (policyholder) whereby a benefit is paid to the designated Beneficiary (or Beneficiaries) if an insured event occurs which is covered by the policy. To be a life policy the insured event must be based upon life (or lives) of the people named in the policy.

Insured events that may be covered include:

-death
-accidental death
-sickness
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; for example claims relating to suicide (after 2 years suicide has to be paid in full)(in India after one year Suicide is covered), 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 (in the US anyway) are whole life, universal life and variable life policies.

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