“The foundation of life insurance is the recognition of the value of a human life and the possibility of indemnification for the loss of that value.”
– F.C. Oviatt
A life insurance policy, commonly known as the life assurance policy is a contract between the policy holder and the insurance company, where the company assures to pay the designated benefits in the form of money, in exchange for the premium, in case of the death of the person insured. The policy holder, generally pays a premium, either on a monthly basis or pays the lump sum amount.
These contracts are legal contracts which describe the limitations of the policy and the circumstances under which it can be claimed. There are specific exclusions in the terms so as to limit the liability of the policy owner. The exclusions include cases of suicide, fraud, war, riots or civil commotion.
Parties to Contract
Generally, the owner of the life insurance policy and the person insured are the same. However, there may be cases where these are two different people. For example, if Liz buys a policy for her own life, she is both, the owner and the insured. But if she buys a policy for Matt, then Matt becomes the insured and she becomes the owner.
The benefits that the owner receives are proceeded upon the death of the insured. Though the benefits are not a part of the policy, the owner can designate them to the insured. Under some circumstances the owner can change the benefits of the policy.
Contract Terms
Special terms may apply, in cases where the insured commits suicide within a specified time, which is generally two years from buying the policy. In such cases the policy becomes null and void. Any misrepresentations in the application by the owner may also nullify the policy. Face amount of the policy is the amount that the policy will usually pay on the death of the insured person as per the terms; although, some policies may offer a greater or lesser face amount after the death. The policy matures after the insured dies or completes the specified age.
Types of Insurance
The policies may be divided into the following sub types: term, universal, whole life and endowment life insurance.
Term insurance provides policy for a specific time period. The policy does not accumulate cash value. Term insurance is also called ‘pure’ where the paid premium buys protection when the death of the insured occurs.
Permanent insurance does not cancel the policy in any case until the owner pays the premium regularly, except if there is a fraud. The four basic types of permanent insurance are whole life, universal life, limited pay and endowment. Life insurance policies can be divided into two categories: protection policies and investment policies.
Life insurance policy began as early as the 2000 BC in China, as a protection for traders. It was later introduced in Babylon around the year 1750. Today, life insurance is a commonly known subject and a lot of individuals as well as families insure themselves under this category. Life insurance policies have not only insured the future of the families but has also emerged as one of the most powerful ventures in the market.
Edelweiss Tokio Life Insurance Company provides various life insurance policies suitable for all type of budget. Contact us today and secure your life with our life insurance plans.
