The situation where there is a written contract between an insurer and policy owner where the insurer agrees to pay the owner a agreed upon sum if the owner happens to die or get a terminal or critical disease, then that contract can be called a life insurance policy. The insurance owner will stipulate in the contract who will get that sum, it can be family or friend. In order to get the sum the policy owner will have to pay a fixed amount every month or a lump sum to the insurance company, known as premiums. There can be modifications to the policy such as the insurer takes care of funeral expenses and so on.
Humankind has been using a basic concept that resembles modern day insurance for centuries. As far back as the ancient Chinese, Greeks and Romans have been using a type of insurance policy for various objects as well as their life.
Of course in those days they did not have the sophisticated tools to keep track of policy holders as they do nowadays, and may not have had the different choices as we do now, but the concept was essentially the same, that is a type of premium was paid to the insurer and when the owner of the policy died the insurer would take care of the funeral expenses.
Life, as everyone knows is full of unexpected dangers and surprises, so much so that we just accept it as part of life and live on.
Most people do not plan their life around uncertain possibilities, we do the best we can and live accordingly. It is because of this unforeseen aspect of life that some people get insurance so that in such a situation their family members are not left with a huge burden. After all death is a certainty and when it happens some folks would like to be prepared.
To get insurance there are some rules that come with it. This usually includes a general profile of the potential customer such as what the person’s age, profession, health and hobbies, if any. This is the information that the insurer will use to see what the risk level of the potential owner will have.
The younger you are, with a relatively safe way of life and work and if you have a healthy life then your premiums will most likely be lower, if all these factors were to the contrary then you would most likely have higher premiums to pay. It basically comes down to how risky it is for a life insurance company to sell a policy to a potential customer.
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Tags: financial planning, future planning, insurance, Life Insurance, Who Needs Life Insurance