Life Insurance

What is meant by insurance?

This has something to do with the following concept behind the insurance:

(1) The Insurer (i.e. insurance company) and Insured (i.e. an individual) enter into a legal contract. The Insured pay a premium to the Insurer and in return the Insurer assures the Insured to compensate him against the losses or hazards mentioned in the contract.

(2) The Insured has an insurable interest in the subject matter (i.e. some property or life of certain individual). This means that the Insured stands to gain if the subject matter is protected against the hazards and will stand to lose if any damage is caused to the subject matter.

(3) Though the Insurer assures the Insured to compensate against certain type of losses, he do not assure to compensate 'all' the losses. In any case the Insured stand to lose 'something' in case of loss of damage to the subject matter. (For example, one can not get a property insured at a higher amount than its actual value and then stand to gain from insurance claim in case the property is damaged. This will be a breach of contract.)

(4) Even after entering into insurance contract with Insurer, the Insured will take all reasonable and appropriate steps for the safety of the subject matter. For example, if a house is insured against theft, fire, etc, the Insured party can not delibrately or negligently expose the house to such hazards.

(5) The Insurer approaches, prompts, lure (???) the Insured to enter into the insurance agreement. However, the Insured party is supposed to reveal all relevant information related to the subject matter in 'good faith'. For example, in case of life insurance the Insured is supposed to expressely reveal to the Insurer of any health complications, etc that he is aware of and that may have some impact on the insurance contract. (The insurance premium is decided keeping in view possible risk, so if some factors are concealed, it will impact the amount of premium.)

LIFE INSURANCE:
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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 or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount called a premium at regular intervals orrr in lump sums. There may be designs in some countries where bills and death expenses plus catering for after funeral expenses should be included in Policy Premium. 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 whereby a benefit is paid to the designated beneficiaries if an insured event occurs which is covered by the policy. To be a life policy the insured event must be based upon the lives of the people named in the policy.

Insured events that may be covered include:

* Serious illness

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, 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.