Life Insurance
Life insurance is a insurance contract between a policy owner (This may be the policyholder) and the insurer, where the insurer agrees to pay a designated (named) beneficiary a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness.
In return, the policy owner agrees to pay a stipulated amount (at regular intervals or in (a) lump sum(s) to the insurer. It can also be stipulated that bills and death expenses plus catering for after funeral expenses should be included in the policy premium.
3 types of life insurance:
Pure Life Plan (Whole of Life Insurance)
To provide your family with money on your death to help them cope financially.
Life & Disability Plan
To help you financially should you become disabled OR to provide your family with money on your death.
To assist consumer the Association for Savings and Investments of South Africa have published a Jargon Buster - Lump Sum Disability Cover article.
Accidental Death & Disability Plan
To help you financially should you become disabled due to an accident OR to provide your family with money on your accidental death.
Additional Life Insurance Benefits
Funeral Life Insurance or Final Expenses Benefits
Insurance designed to cover the administration of an estate, settlement of bills , including the expenses normally associated with death, funeral cover, transport of deceased and mourners, and after funeral expenses such as the wake. Click here to read more detail on Funeral Insurance Quotes.
In most Anglophile countries life insurance may also be better known as life assurance.
The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured.
Unlike short-term insurance which is a case of "What if something happens?" (It may not happen) - life insurance is really a case of about "when something happens", because life events such as disease, disability and death are very real, inevitable events.
Life policies are legal contracts and the terms of the contract describe the limitations of the insured events.
Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to suicide, fraud, war, riot and civil commotion.
Life-based contracts tend to fall into two major categories:
- Protection policies - designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.
- Investment policies - where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US anyway) are whole life, universal life and variable life policies.
Riders, Supplements, Additions and options on Life Insurance Policies
Second-to-die (Survivorship) life insurance is a form of whole life insurance that covers two lives and pays the proceeds at the death of the second insured.
This type of policy is used primarily for estate planning.
Life Cover
Life cover or life insurance can be used to settle debt, outstanding bonds, estate duty and other financial costs in the event of death. It can pay out an income and provide financial security for your family. It also enables business partners to continue running your business without added capital strain.