Life Insurance

Life insurance, also called life assurance in the US, is a contract between an individual and an insurance company to pay out a specified amount of money upon the death of the policyholder. The payment could be in the form of an annual payment or as a lump sum. There are different types of life insurance policies that will only cover death under certain circumstances. Voluntary death policies will cover you in the event of death from any cause, but accidental death policies will only provide an insurance payment to your beneficiary if you are killed in an accident.

When you take out a life insurance policy, you have to designate a beneficiary. This is the person who will receive the monetary payment after showing proof of your death, which is the death certificate signed by the doctor. There is a difference in the insured and the policyholder. A person who takes out life insurance for himself/herself is both the insured and the policyholder, but if you take out an insurance policy for someone else, you are the policyholder and the other person is the insured.

The cost of the premium depends to a large extent on your job. If you are working in an industry where there is a high rate of death due to injuries on the job, your premiums will be much higher than a person who works from home, for example. The age at which you take out the policy is also a factor. The insurance company uses statistics in the method of determining the costs of policies, so the older you are you have a greater chance of dying sooner than a younger person. This means your policy at age 40 would be higher than an identical policy for a 20-year old. Another factor that is considered in the cost of a policy is whether or not you smoke or use drugs. This is because these factors do lead to early deaths.

There are different types of life insurance:

Temporary – this is insurance for a specific term, such as one year, or five years. The premium is based on the length of the term.
Permanent – this insurance remains in force until the owner decides to end the policy or until the policy matures.
Whole life coverage – this policy would be for a predetermined cash value guaranteed by the insurance company
Universal Life Coverage – this policy has a cash value and the premiums paid each year increase the value of the policy.