Most people buy life insurance these days, not only as a nest egg for old age but also as money saving agents. By paying a regular premium for a number of years, you are assured of a lump sum of money when it matures and if you don’t die before the stipulated years on the insurance policy. In case you die before that, your heirs or your beneficiaries will get the lump sum when they put in a claim.
An insurance policy is a contract between the insurer and the insured person. The insurer agrees to pay a lump sum of money after a stipulated number of years to him or to the beneficiaries in the event of the insured person’s death before the policy matures. This may also cover the cost of funeral expenses. The insured person can name his beneficiaries who can be a part of his family or anyone else and they can stake a claim to the money after the insured person dies.
The insurer issues the policy only after detailed inquiries regarding the lifestyle and the health, the age and the sex of the to- be- insured person. The life insurance is bought to tide over difficulties in case of serious illness, terminal illness or loss of limbs or death. Anyone can buy life insurance. The company has the right to make medical inquires of the person by referring to the Medical Information Bureau in the US which has a data base of all people applying for insurance. They can even get information from the medical practitioners attending on such people.
The premium to be paid regularly once the life insurance has been bought, varies. Older a person higher will be his premium. Higher the face value of the insurance policy, higher is the premium. Once the policy matures he will get the face value money. Sometimes the insured person and the policy holder may be two different people though generally they are one and the same. This happens if a person, like a husband, buys an insurance policy for his wife and also pays the premiums. He is the policy owner while she is the insured person.
There can be life insurance policies which not only cover death, but also serious illness. There are two major categories of life based contracts. They are protection policies and investment policies. In the US the common ones are whole life, universal life and variable life policies