Sunday, February 18, 2007

Life insurance

Life insurance (life assurance in British English) 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's death. In return, the policyowner (or policy payor) agrees to pay a stipulated amount called a premium at regular intervals.
As with most insurance polices, life assurance 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 name in the policy.
Insured events that may be covered include:
diagnosis of a terminal illness,
diagnosis of a critical illness,
disability due to ill health,
permanent disability,
accidental death
requirement for long term care. (This list is not exhaustive).
Life policies are typically presented as types 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 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.
Investment policies - where the main objective is to facilitate the growth of capital by regular or single premiums.