Most people insure their lives and if they contract an illness or die within the stipulated period of the policy then a lump sum of money is given to them or their heirs. Life insurance is a contract between the insurer and the insured person. The insurer asks a lot of questions regarding health, lifestyle, age, and other things of the person to be insured. If everything is aright, then the policy is signed.
The insured person decides the amount or the face value of the insurance policy and its term. The insured person promises to pay a pre decided amount of money called the premium to the insurer at regular intervals. This premiums collected by the insurance companies is invested frown where they settle the claims of the claimants.
The life insurance is taken against illness, accident or death. If the person has an accident and is inured the insurance company has to pay the stipulated amount. If he has contracted any long term illness also, the insurer has to pay the amount. If he dies within the stipulated period, his beneficiaries get the entire insured sum. Sometimes the insurer insures the person for his funeral expenses as well. This covers the cost of the funeral expenses. The insured person names his nominee when he buys the policy. The nominee can be a family member or even a friend or an acquaintance.
Earlier the beneficiaries of suicide cases were not given the insured amount. But now, after many cases, suicide cases can have claimants on their insurance policies. Unless it can be proved that the person committed suicide so that his beneficiary can get the money. In the United States the Life Insurance companies can collect medical information of the proposed insured person by referring to the Medical Information Bureau which has all the details of the person’s health. In fact the insurer also has the necessary permission to get information from the proposed insurer’s physician.
The premiums have to be paid regularly. The amount depends on various factors. Age is one of them. If the insured person is older, his premiums will be higher. If the policy matures before the person dies, he gets the face amount mentioned on the life insurance policy.
Generally the insured person and the policy owner are one and the same. However, in some cases a husband may buy a policy for his wife. In which case the wife becomes the policy holder, while the husband who also pays the premiums is the insured person.