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Life Insurance

Definition

Life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of an insured person. Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policy holder typically pays a premium, either regularly or as one lump sum. Other expenses, such as funeral expenses, can also be included in the benefits.

What is Life Insurance?

Life insurance gives protection of income in case the policy maker gets injured or passes away. The beneficiaries are named beforehand and all the proceeds go to them. In short, life insurance protects one from the financial impact of death of the person who is insured.

Understanding Life Insurance

The main purpose of life insurance is to give financial security to the beneficiaries in case the policy maker passes away. It is recommended that before you get life insurance for yourself, you assess the financial situation, and the standard of living that you want your dependents to have in case you pass away. It is advised that you review your life insurance at a yearly basis, especially if you experience a major change in your life like divorce, marriage, birth of a child, and acquisition of a major asset like a business or a house.

Types of Life Insurance

Term Life Insurance

This is designed for financial protection for a specific time, like for a decade or two. The premium stays for the period that you select, after which certain policies might still offer you coverage, but for a higher premium price. This can be used to replace loss of income during working years, and can provide security to your beneficiaries.

Universal Life Insurance

Universal life insurance gives lifetime coverage, and has extremely flexible policies that allow one to change their premium payments. This type of insurance is used to preserve wealth so that it is easily transferred to the beneficiaries.

Whole Life Insurance

This is permanent life insurance that gives lifetime coverage. Since the coverage period is for the entire life, the premium here is significantly higher than term life. Just like universal life, this is used to preserve wealth to transfer to the beneficiaries.

Determining the Costs

The premium costs are determined by assessing the risk related categories, but these don’t affect the amount or the duration of the coverage. The rate is determined by the following factors:

  • Family medical history
  • Overall health
  • Your lifestyle

Further Reading


The financial performance of life insurance companies in Ghana
www.emerald.com [PDF]
Current study investigates the impact of firm level characteristics on capital structure of life insurance companies of Pakistan. For this purpose, leverage is taken as dependent variable while profitability, size, growth, age, risk, tangibility of assets and liquidity are selected as …

Equity-linked life insurance: A model with stochastic interest ratesEquity-linked life insurance: A model with stochastic interest rates
www.sciencedirect.com [PDF]
Current study investigates the impact of firm level characteristics on capital structure of life insurance companies of Pakistan. For this purpose, leverage is taken as dependent variable while profitability, size, growth, age, risk, tangibility of assets and liquidity are selected as …

Life insurance markets in developing countriesLife insurance markets in developing countries
www.jstor.org [PDF]
Current study investigates the impact of firm level characteristics on capital structure of life insurance companies of Pakistan. For this purpose, leverage is taken as dependent variable while profitability, size, growth, age, risk, tangibility of assets and liquidity are selected as …

Competition and efficiency in the Dutch life insurance industryCompetition and efficiency in the Dutch life insurance industry
www.tandfonline.com [PDF]
Current study investigates the impact of firm level characteristics on capital structure of life insurance companies of Pakistan. For this purpose, leverage is taken as dependent variable while profitability, size, growth, age, risk, tangibility of assets and liquidity are selected as …

On accounting standards and fair valuation of life insurance and pension liabilitiesOn accounting standards and fair valuation of life insurance and pension liabilities
www.tandfonline.com [PDF]
Current study investigates the impact of firm level characteristics on capital structure of life insurance companies of Pakistan. For this purpose, leverage is taken as dependent variable while profitability, size, growth, age, risk, tangibility of assets and liquidity are selected as …

The mismatch between life insurance holdings and financial vulnerabilities: evidence from the Health and Retirement StudyThe mismatch between life insurance holdings and financial vulnerabilities: evidence from the Health and Retirement Study
pubs.aeaweb.org [PDF]
Current study investigates the impact of firm level characteristics on capital structure of life insurance companies of Pakistan. For this purpose, leverage is taken as dependent variable while profitability, size, growth, age, risk, tangibility of assets and liquidity are selected as …



Q&A About Life Insurance


How often should you review your life insurance policy?

It is advised that you review your life insurance at a yearly basis, especially if you experience a major change in your life like divorce, marriage, birth of a child, and acquisition of a major asset like a business or house. This is designed for financial protection for specific time period such as decade or two. The premium stays for the period that you select after which certain policies might still offer coverage but for higher premium price. This can be used to replace loss of income during working years and provide security to your beneficiaries. Universal life insurances gives lifetime coverage with extremely flexible policies allowing one to change their premium payments this type of insurances are used to preserve wealth so that it is easily transferred to beneficiaries this are permanent insurances giving lifetime coverages since the coverage period is entire lifetime premiums here significantly higher than term lifes just like universal lives these used preserve wealth transfer beneficiary premiums costs determined risk related categories though these dont affect amount ""

What do universal lifetimes coverages give?

Universal lifetimes coverages give lifetime coverages since coverage period entire lifetime premiums here significantly higher than term lifes just like universal lives these used preserve wealth transfer beneficiary premiums

What is life insurance?

Life insurance gives protection of income in case the policy maker gets injured or passes away. The beneficiaries are named beforehand and all the proceeds go to them. In short, life insurance protects one from the financial impact of death of the person who is insured.

What does life insurance protect against?

Life insurance protects one from the financial impact of death of a person who is insured.

How can you assess your situation before getting a life insurance policy for yourself?

You should assess your financial situation and standard of living that you want your dependents to have in case you pass away.