At various times in our lives we are encouraged to insure our lives to make sure that in the case of our untimely death, there is a lump sum of money available to provide our loved ones with a comfortable life or at least, not left with large bills left to pay.
There can be four parties in any Life Insurance policy. The party providing the insurance, the party being insured, the owner of the policy and the beneficiary. Normally the owner and the party being insured are the same person but in some cases, such as a firm wanting to protect themselves from losing a valuable human resource or a wife wanting to insure her husband, another party may take out a policy. The beneficiary is the person to whom the insurance is paid out to, normally a husband, wife or other family member.
Life Insurance is sold like other insurance at a premium that is worked out by taking into consideration three things. The age, the gender and whether the person being insured is a smoker. This information helps determine what premium should be charged based on mortality rates which currently assumes that approximately two people in every thousand aged 25 will die rising to approximately 25 in every thousand for those aged 65. Based on this information, statisticians will determine the premiums required to cover the risk which for a 25 year old male with a $100,000 policy, should at a minimum be around $200 per year.
The premiums paid to the insurance company are then invested to provide a pool from which claims and operations are paid.
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