None of us is going to live forever. While this is absolutely true, in this short life span of ours, we forge a lot of relationships and make a family. Our near and dear ones, especially one’s spouse and children are very important to each one of us. What would happen, if we were to meet with an accident? Or what would happen if we were to die untimely as a result of a disease. In such a circumstance, all of us would wish that our family or near and dear ones should not lose their quality of life and continue to live at the same comfort level. Life Insurance as the word suggests is an insurance that a person takes out on his life to secure his or her family financially on his untimely death.
Although life insurance cannot prevent accidents at any point of time or it cannot make up for your loss personally to your near and dear ones, it is of great help to keep them financially secure before they find their bearings to earn a livelihood. Life insurance is thus a financial cover offered to your family in the event of your untimely death.
Although life insurance has been defined with the above meaning traditionally, many life insurance companies have evolved and are offering insurance cover along with a lot of other benefits also known as riders. Many takers of life insurance have also reaped benefits in the form of financial gains by treating life insurance as a secure investment tool.
Life insurance traditionally is offered in two different contexts – participatory and non-participatory. Participatory form of life insurance extends life cover to an individual until a fixed number of years and if no claim is made, returns the premiums along with hefty financial returns to the proposer. This means that life insurance, in addition to covering your life for a particular amount of money, also gives you a return on the premiums paid. Te other form of life insurance, the non-participatory form does not offer any returns and covers the life of the proposer until a pre-decided age. The difference in both these kinds of life insurance lies in the calculation of premiums. Understandably, the participatory life insurance has a much higher premium attached to it than the non-participatory one.
Coming to the details of how life insurance works, any life insurance policy has its own set of rules and one needs to read through it properly before making a decision. A informed decision is always a wise decision, especially if the investment or coverage will be for a number of years. When you opt for a life insurance cover, it is understood that you are in good health. If the insurance cover is heavier, a life insurance company may insist on a health check. Once this is done and if no abnormalities are found, the life insurance enters into a contract with you to cover your life with a sum assured at a periodic payment of premium. In case of any abnormalities found during the health checkup, the life insurance company may downgrade the proposed cover or increase the premium as it may think fit. Almost all life insurance companies work on the same principles in this regard.
A life insurance policy is a contract and normally it has four parties to it. One is the life insurance company itself, the second is the proposer, one who is proposing the policy (if you are taking a cover for the life of your spouse, you are the proposer), the assured (one whose life is covered) and the nominee (one who gets the benefits of the policy upon the untimely death of the life assured).
Once this is done with and your life is covered by a life insurance policy of your choosing, you will need to keep paying premiums like clockwork. If you fail at any stage, the life insurance company may cancel your insurance policy according to their guidelines and rules. In such an event your life will not be covered until you pay your dues and reinstate the policy.
In case of the death of the life assured during the course of the policy, the life insurance company needs to be informed through claim form along with a proof of death. The company then will send all proceeds calculated up-to-date to the nominee of the policy. In certain cases the life insurance company may take recourse to investigation if the death has occurred under suspicious circumstances. For example, the life insurance company will not pay the sum assured if the death is caused by suicide. Apart from certain circumstances mentioned of death mentioned in the policy contract, a life insurance company normally disburses all claims within a week.