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Thursday, May 17, 2012
Provisions of Life insurance
There are many instances in life where something may go wrong such as being involved in accidents or natural disasters. When these things happen, loss of lives may occur. The devastation that the surviving family members may feel may vary from family to family nevertheless each family will feel grief. If a head of the family dies, his/her family will not only feel grief. The surviving family members will also feel the financial burden even long after the death. This is unless the head of the family had purchase a life insurance policy before his/her death.
A life insurance policy is a legal contract between an insurance company and a policyholder. The policyholder will agree to pay regularly the premium rate as stated in his/her life ins quote until the total cost of coverage has been reached. The insurance company in its part will agree to indemnify the loss of life of the policyholder provided that the death falls within the provisions of the policy. There are several provisions that must be followed first before the death of the policyholder is indemnified. Here are the provisions:
1. If the policy is a term policy, the death of the policyholder must fall within the term. Term insurance policies vary in term ranging from 1, 5, 10, 15, 20, 25, 30 years. Insurance companies will be held liable for indemnifying loss of life and paying out the death benefits if the death will occur within the selected term of the policy. If the policyholder outlives the term, he/she will no longer be covered by insurance and the insurance company will not be obligated to insure the policyholder anymore.
2. Insurance policies differ from each other. Each life insurance policy is different and may contain different provisions for the cause of death. One common provision that insurance policies have even if it is just a low cost life insurance is a suicide provision. The common suicide provision of insurance policies state that if the policy holder dies as a result of suicide within two years from the issuance of the policy, then the insurance company will not be obliged to payout the death benefits. However, if the policy holder commits suicide after the two-year suicide provision period, then the beneficiaries would be able to collect the death benefits. It is important to check for the provisions regarding death so that the policy holder and his/her beneficiaries will understand better what their policy enables them to have.
Life insurance policies come in different variations but they can be classified into two basic classes namely: the temporary policy and the permanent policy. The temporary policy has the tem policy as its subclass. Term policies provide life insurance coverage to a policy holder for a specified amount of time which can be or one or more years. There are three key factors that determine the type of term insurance which include (1) the amount of protection, coverage or death benefit, (2) the premium to be paid, and (3) length of coverage (term). The amount of coverage will be the actual cash value that the beneficiaries of the policy holder will be able to collect upon the death of the policy holder. The policy holder can choose the amount of coverage that his/her family might need.
The premiums are the regular payments that the policy holder will have to pay in order for him/her to be covered by insurance. The amount of premiums can be computed by an insurance underwriter or can be computed automatically such as the life insurance quote on line.
A person who wants to be covered by insurance must first apply for one. Traditionally, a person wanting insurance coverage must talk with an insurance agent and undergo an underwriting process. This person must disclose pertinent information about his/her medical background as well as undergo a medical examination. The results of this exam will give the underwriters the bases for determining the amount of premiums that the person must pay on a regular basis. Nowadays, insurance companies are coming up with new ways to entice more and more people to purchase a policy. They have come up with a no medical exam life insurance policy which no longer requires potential policy holders to undergo an exam.
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