Life insurance refers to a form of contract between the insurer and the policy owner whereby the insurer has agreed to pay a sum of money to a designated beneficiary. The money is payable upon the occurrence of terminal illness, critical illness, or death. In exchange, the policy owner pays a specified amount in lump sums or at regular intervals. In some countries, policy premiums also cover death expenses, bills, and after funeral expenses.

The life policy is a form of legal contract, and its terms and conditions cover the limitations and scope of insured events. If there are specific exclusions, they will be included in the contract so as to limit the insurer’s liability. For instance, claims related to fraud, suicide, civil commotion, riot, and war are excluded from the scope of insured events.

Types of Life Insurance Policies

Life insurance contacts fall into two main categories: investment policies and protection policies. The first type aims to stimulate the growth of capital coming from single or regular premiums. Common types of insurance policies include variable life, whole life, and universal life policies. The whole life insurance is a type of insurance contract which remains in effect for the entire life of the insured individual. This insurance requires the payment of annual payments into the policy. The universal insurance is a form of life insurance whereby payments that exceed the cost of the insurance get credited to cash value. The variable life insurance works by building cash value. This cash value may be invested in various separate accounts which are quite similar to mutual funds. Protection policies, on the other hand, are designed to offer benefits upon the occurrence of specific events. The benefits are typically in the form of a lump sum payment while the typical design of this type is the term insurance.

Proceedings upon Death

In case the insured person passes away, the insurer will require an acceptable proof of his or her death before the payment of the claim. A death certificate, together with completed insurer’s claim, is the minimal proof that is required before the insuring company proceeds with payment. The claim has to be signed and notarized. If the insurer finds the death of the insured suspicious or considers that the amount of the policy is excessive, they may carry out an investigation regarding the circumstances of the death. Upon the findings, the company decides whether the claimant is to be duly paid. Life policies may be paid in the form of annuity or as a lump sum. Annuities are either paid over specified periods of time or for the lifetime of the beneficiary.

Contract Terms

The terms and conditions vary depending on the country, location, and provider of the policy. Usually, the policy becomes null in case the insured person commits suicide. Another reason for nullification is misrepresentations written down on the application by the insured. A life policy matures in case that the insured person dies or reaches a set age, such as 100.