Basic Guide to Life Insurance

Life is uncertain, we all will die one day and no one could challenge the uncertainty of life. 

Thus, it is very difficult to judge the period of life and when it will be over. But, we all have a duty to provide an assurance to our dependents who could suffer financially on our death. 

Therefore, people would rely on life insurance policy and it plays a vital role by undertaking to pay the insured on the occurrence of a sudden death.

Hence, various types of life insurance policies are available and some of these are stated as follows,  

i) Term insurance.

This policy provides cover for a specified period only. However, the policy benefit is payable to the benificiary if the life insured dies during the term. 

however, After the expiry of the specified time period, client must  potentially obtain further coverage with different payments and conditions.

ii) Endowment policy

In the endowment policy, the policy runs only for a limited period or up to a particular age not exceeding the age of 70 years. This plan provides for the payment of the sum insured after a specified number of years or upon earlier death of the insured.

iii) Whole life policy

The fundamental feature of this policy is that, the sum insured is payable on the death of the insured, whenever it occurs. Therefore, in the case of whole life policy, the premiums are payable throughout the life of the insured. But the premium charge is relatively low under this policy.

Any person who has the capacity to enter in to valid contract can take out a life insurance policy on his own life or on those in whom he has insurable interest.

Thus, a person who wishes to take out a life insurance policy must fill a proposal form which is supplied by the insurer. The personal form requires different kind of information related to the health of the proposer and kind of information related to his life style.The questions on the proposal form may be focused to get the information about the family history of proposer as well as the habits of his life.

However, the proposer should answer all the questions on the proposal form in good faith and must disclose all the material facts which would affect the decision of a reasonable prudent insurer whether he accept the contract or not.

Therefore, non-disclosure of material facts renders the contract voidable at the instance of the insurer.

However, in the contract of life insurance, assured must only have an insurable interest in the life of the insured at the time, when the contract is entered in to. Thus, the insurable interest on the life of the insured is not required to be present at the time of the insured’s death so as to render the policy valid.

finally , in many life insurance policies,  suicide clause is included as a contract term to render the police null and void if the insured commit suicide within specified time. Therefore no one can misuse the life insurance policy as alternative  remdy for a financial problems.