Also known as life insurance, it is also called life assurance. The contract between an insured person and an insurer is where the insurer promises to pay the beneficiary a certain amount of money in the event of the insured’s death. Some clauses in the contract could result in the insured receiving the money prior to his death.
These situations may include those in which one is diagnosed with a critical or terminal illness. Regular premium payments are required. In some cases, funeral expenses can be included in the contract. The policy can be either a one-year or a lifetime contract. Important to remember that this policy is a legal contract. The contract often has exclusions which are usually written in the contact. This is to limit the liability for the insurer. Examples of common claims include those relating to suicide or fraud, riot, and civil disorder. There are two main types of life insurance.
1. A protection policy is designed to offer a benefit in case of a specific event, typically a lump sum amount of money. Term insurance
2. This policy is an investment policy that aims to increase capital through regular or single premiums. For example, whole life and universal policies are common forms.
Life insurance covers many parties: the policyholder holds all rights to the policy; the insured may also be the owner of the policy. The beneficiary is the recipient of the proceeds.
There is a difference between an insured person and a policyholder
An insured person is different from a policyholder. Although they may be considered the same person in insurance, this is not always true. My son may be the one who buys insurance. In this scenario, I would be the owner of the insurance cover and my son would be the insured. However, the guarantor would be the policy owner. The son is still a participant in the contract but not necessarily involved.
The beneficiary is someone who will receive the proceeds after the insured’s death. If the policy is irrevocable, the policy owner cannot change the beneficiary. The insurance company has tried to limit policy purchases to people with an insured interest in the CQV, even if the policy owner isn’t insured. Insurable interests are required for life policies. This means that close relatives will have to be considered. This requirement prohibits individuals from gaining benefits from the purchase of speculative insurance policies for people they expect will die.
Insurance also comes with terms. Certain exclusions may apply to life insurance. For example, some insurance policies have a suicide clause that states that if an insured commits suicide, the policy is null and null. Any misrepresentation in the application could also render the insurance policy null.