Life insurance companies
What is insurance?
Insurance is a contract in which one party undertakes to indemnify another partys financial loss arising out of events, such as collision, theft, storm, hurricane, inundation, etc.
In other words, insurance is a mechanism through which individual risks are transferred to an insurance company, which agrees to pay for the financial loss of the insured.
Introduction to life insurance
The major part of insurance business is life insurance, the operations of which depend upon the law of morality. Life insurance is also referred to as Life Assurance, especially in England.
Life Insurance is an agreement that guarantees to pay a specified amount of money upon the death of the insured, while the policy is in effect.
In other words, it provides coverage against economic loss caused due to the death of the insured, either by accident or some other means. Thus, it hedges against the risk of potential financial loss.
life insurance rationale
The need for life insurance highly depends upon the age and the responsibilities assigned with it. One applies for life insurance policy so that at the time of ones death, ones family or dependents can get compensation or money for their living. The dependents may include parents, spouse, and children.
The amount of insurance should confirm the standard of living one is willing to provide ones dependents after ones death. The standard of living may comprise the social benefits, cash, or other sources of income. An insurance agent, Internet, financial articles, etc.can help the applicant in making a choice amongst the best available life insurance policies that he should opt for, in order to provide an umbrella to his family against potential financial losses.
Purchasing life insurance policy
Though the need for life insurance is dependent upon the age of person, but at the same time, life insurance can benefit - young or old, single or married, with kids or without kids. Anyone of these may purchase life insurance policy if he knows that his death would take away all pecuniary benefits from his dependents.
Insurance for women
Before nationalization, many private insurance companies used to offer insurance specially meant for women. These were built with some additional premium, and the terms and conditions associated with this insurance policy were more or less restrictive in nature.
After life insurance got nationalized, these terms under which life insurance are being revised from time to time. As told earlier, before nationalization, this insurance scheme was specially meant to provide coverage to female section, but at present, both men and women are treated at equal parlance.
Medical and non medical schemes
Only after an individual has passed medical examination executed by insurance companies, is liable to take the policy. However, this practice takes a lot of time in the processing.Therefore, in order to smooth the progress and avoid any inconveniences, the life insurance companies have initiated to extend their coverage without executing the medical examination. But the issuance of such policies carries certain terms and conditions to be satisfied by the applicant, failure of which would result into the applicant not been able to take up the policy.
With profit and without profit plans
Life policies of any type can be either with profits or without profits.
In case of with profits policies, bonuses out of extra earnings from various investments are added to the assured sum periodically during its currency or occasionally paid out in cash.
In case of without profits policies, the sum paid out on maturity or at death is the sum assured in the policy when it was taken out.
The premiums on with profits policies are higher than those on without profits policies as allowance for the bonuses paid.
Keyman insurance
This insurance policy is meant to provide coverage to key employees of any business unit. This policy is taken by a business unit as a safeguard against future pecuniary losses, which may crop up in the event of sudden demise of its key employees.
What are insurance companies?
Insurance Companies sell insurance in exchange of a reasonable amount of fee. These are financial intermediaries that collect and invest large amounts of premiums.They offer protection to the investors, provide means for accumulating savings, and allocate funds to the government and other sectors.
Investments of insurance companies have been largely in government bonds, mortgages, state and local (municipal) government claims, and corporate bonds. Insurance business consists of spreading risks over time and sharing them between persons and organizations.
Ttypes of life insurance companies
There are five basic types of life insurance companies:
1. Stock Insurance Companies
Stockholders, who may not be necessarily policyholders, own these companies. Their main motive is to earn profits by selling insurance.The special condition of this policy is that these companies do not pay dividends for policyholders.
2. Mutual Companies
These companies differ from the stock insurance companies, in a way that these may pay dividends to the policyholders. These are owned by the life insurance policyholders. These dividends arise from the income generated by charging higher rates of premiums.
3. Professional, Fraternal and Religious Companies
These companies execute in a different state than the one in which general public reside. In other words, whole operations are implemented with the help of mail service. Thus, the insurance agent has no role to play here.Therefore, it becomes quite essential to check for the viability of the company with the State Insurance Commissioner\'s office before taking any such policy.
4. Individual Life Insurance
In this, a company agent offers policies such as term insurance, whole life insurance, annuity contracts, and endowment type policies. After being properly examined, a certificate or a policy, as a proof of being insured, is given to the individual.
5. Group Life Insurance
In this type of insurance, no medical examination is required. The rates of premium are quite low because only a few operating expenses are incurred on a group of people. This policy is in operation only till the employee is working within the business firm. Once he leaves, the protection also comes to a halt.
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