Life Insurance 101

Life insurance is insurance covering the death of the insured. As with all types of insurance, you have to pay a premium in exchange for transfer of the risk of your death to insurer. There are three parties in a life insurance transaction-the insurer, the owner of the policy, and the insured. Usually, insured and owner is the same person. Beneficiary is another party indirectly involved in this transaction. Beneficiary can be a single person, a group, or an institution who will receive the proceeds in the event of the death of the insured.

The policy holder or owner of the life insurance can change the beneficiary unless there is any clause of irrevocable beneficiary. Otherwise, beneficiary needs to be open to borrowing of cash value, policy assignment, or changes in beneficiary. There are many different terms and conditions in this legal contract involving the life of the insured. Nevertheless, no conditions and terms apply in special cases like death due to suicide, death of insured within contestability period-normally within two years of starting the policy, misrepresentation of facts by the insured, etc.

A life insurance is a legal contract whereby the insurer agrees to pay a specified amount on the death of the insured or when insured reaches a specified age in return for regular premiums paid during lifetime. Such insurance provides financial security to the policy owner. It also pays for funeral costs, other associated expenses, and reimbursement of wages of the deceased.

Part II at: http://www.insurance-facts.org/life_insurance101_p2.htm

Greg is a staff writer at http://www.insurance-facts.org and has written articles on health, home owners, life and car insurance.