Life insurance (or life insurance , especially in the Commonwealth of Nations) is a contract between the insurance policyholder and the insurer or the insurer, in which the insurer pledges to pay the designated beneficiary a sum of money (benefit) in return for a premium, after the death of the insured (often the policyholder). Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. The policyholder usually pays the premium, either on a regular basis or as a lump sum. Other expenses, such as funeral expenses, can also be included in the benefits.
The life policy is a contract of law and the terms of the contract illustrate the limitations of the insured event. Special exemptions are often written into contracts to limit the obligations of the insurer; Common examples are claims relating to suicide, fraud, war, riots, and civil strife.
Life-based contracts tend to fall into two main categories:
- Protection policy - designed to provide benefits, usually at a time, in case of a particular event. The general form - more common in recent years - from design protection policy is term insurance.
- Investment policy - the main objective of this policy is to facilitate capital growth with a regular or single premium. The general form (in the US) is an entire life, a universal life, and a variable life policy.
Video Life insurance
Histori
The earliest form of life insurance originated in Ancient Rome; "funeral clubs" cover the cost of members' funeral expenses and help victims financially. The first company to offer life insurance in modern times is the Amisable Society for the Eternal Security Office, founded in London in 1706 by William Talbot and Sir Thomas Allen. Each member makes an annual payment per share of one to three shares taking into account the age of the members to twelve to fifty-five. By the end of the year, some of the "peace donations" were shared among the wives and children of deceased members, in proportion to the number of shares owned by the heirs. The Amicable Society started with 2000 members.
The first life table was written by Edmund Halley in 1693, but it was only in the 1750s that the necessary mathematical and statistical tools existed for the development of modern life insurance. James Dodson, a mathematician and an actuary, is trying to set up a new company that aims to balance long-term life insurance policy risks well after being denied entry to the Friendly Life Insurance Society because of his advanced age. He was unsuccessful in his efforts to get the charter from the government.
His disciple, Edward Rowe Mores, was able to establish a Society for Equitable Guarantees in Life and Survival in 1762. This is the world's first mutual insurance and pioneered age-based premiums based on mortality rates laying the "framework for the practice and development of scientific insurance." "the basis of the guarantee of modern life in which all future life insurance schemes are based".
Mores also named actors to key officials - the earliest known reference to the position as a business matter. The first modern actuary was William Morgan, who served from 1775 to 1830. In 1776, the Institute made its first actuarial assessment of liability and then distributed the first reversal bonus (1781) and provisional bonus (1809) among its members. It also uses regular assessments to balance competing interests. The Institute seeks to treat its members fairly and the Board of Directors seeks to ensure that policyholders receive a fair return on their investment. Premiums are set by age, and anyone can be accepted regardless of their health circumstances and other circumstances.
The sale of life insurance in the US began in the 1760s. The Presbyterian Synod in Philadelphia and New York City created the Corporations to Eliminate Widows and Children from Poor and Depressed Presbyterians in 1759; The episcopalian priest organized a similar fund in 1769. Between 1787 and 1837 more than two dozen life insurance companies started, but less than half a dozen survivors. In the 1870s, military officers united to find both the Army (AAFMAA) and the Navy's Absolute Assistance Association (Navy Mutual), inspired by the fate of widows and orphans stranded in the West after the Great Horn Battle, and from a family of US sailors who died at sea.
Maps Life insurance
Overview
Contracted parties
The person responsible for making payments for the policy is the owner of the policy, while the insured is the person whose death will trigger the death benefit payment. The owner and the insured may or may not be the same person. For example, if Joe buys a policy of his own life, he is the owner and the insured. But if Jane, his wife, bought a policy about Joe's life, he is the owner and he is the insured. The policyholder is a guarantor and he/she will be the one paying the policy. The insured is a participant in the contract, but not necessarily a party to the contract.
Beneficiaries receive a policy processed on the death of an insured person. The owner appoints the recipient, but the heir is not a party to the policy. The owner may change the recipient unless the policy has an irrevocable beneficiary designation. If a policy has an irrevocable beneficiary, any change of beneficiary, policy assignment, or cash value lending will require the consent of the original beneficiary.
In cases where the policy owner is not insured (also referred to as celi qui vit or CQV), the insurer seeks to limit the purchase of policies to those with an insurable interest in CQV. For life insurance policies, close family members and business partners will usually be found to have insurable interests. An insured interest requirement usually indicates that the buyer will actually lose if the CQV dies. Such a requirement prevents people from benefiting from purchasing purely speculative policies on people they expect to die. Without an insurable interest requirement, the risk that a buyer would kill CQV for insurance proceeds would be great. At least in one case, an insurance company selling the policy to an insured buyer without interest (who later killed CQV for results), was found liable in court for contributing to the death of the wrong victim (Liberty National Life v. Weldon, 267 Ala. 171 (1957)).
Contract terms
Special exceptions may apply, such as a suicide clause, where the policy becomes null and void if the insured commits suicide within the specified time (usually two years after the date of purchase; some states provide a mandatory one-year suicide clause). Any misinterpretation by the insured on the application may also be the reason for the cancellation. Most U.S. states have a maximum period of contestability, often not more than two years. Only if the insured dies within this period, the insurer has the legal right to file a claim on a false basis and request additional information before deciding whether to pay or deny the claim.
The nominal amount of the policy is the initial amount to be paid by the policy on the death of the insured or when the policy is due, even though the actual death benefit may give greater or less than the nominal amount. The policy is mature when the insured dies or reaches a certain age (such as the age of 100 years).
Costing, insurability, and underwriting Most of the income received by insurance companies consists of premiums, but income from premium investments forms an important source of profit for most life insurance companies. Group Insurance Policy is an exception to this.
In the United States, life insurance companies are never legally required to provide protection to all persons, with the exception of the Civil Rights Act compliance requirements. Insurance companies themselves determine insurability, and some people are considered uninsured. Policies can be rejected or assessed (increasing the amount of premiums to compensate for higher risk), and the premium amount will be proportional to the nominal value of the policy.
Many companies separate the applicants into four general categories. This category is preferred , preferred , standards , and tobacco . The best option is only for healthy individuals in the general population. This may mean that the insured candidate has no adverse medical history, is not under medication, and has no family history of early onset cancer, diabetes, or other conditions. Preferably means that the proposed insured is currently in treatment and has a family history of certain diseases. Most people are in the standard category.
People in the tobacco category usually have to pay a higher premium because of higher mortality. The US mortality chart recently estimated that around 0.35 out of 1,000 non-smoking males aged 25 will die during the first year of policy. Mortality is about twice that of every ten years, so the first year of death rate for non-smokers is about 2.5 out of 1,000 at the age of 65. Compare that with the US men's mortality rate of 1.3 per 1,000 at the age of 25 years. and 19.3 at age 65 (regardless of health status or smoking).
Death continues
After the death of the insured, the insurer needs an acceptable death proof before paying the claim. The minimum required normal evidence is a death certificate, and an insurance claim form is completed, signed, and usually notarized. If the death of the insured is suspicious and the amount of a large policy, the insurer can investigate the circumstances surrounding death before deciding whether it has an obligation to pay claims.
Payment of the policy may be a lump sum or as an annuity, paid in routine installment either for a certain period of time or for the lifetime of the beneficiary.
Insurance vs. insurance
The specific uses of the terms "insurance" and "guarantee" are sometimes confusing. In general, in jurisdictions where both terms are used, "insurance" refers to providing coverage for events that may occur (fire, theft, flood, etc.), while "warranties" are terms of coverage for a certain events happen . In the United States, both forms of insurance are called "insurance" for reasons of simplicity in companies that sell both products. By some definitions, "insurance" is any liability that determines the benefit based on actual loss while "guarantee" is a guarantee with predetermined benefits regardless of the loss incurred.
Life insurance can be divided into two basic classes: temporary and permanent; or the following subclasses: term, universal, lifetime, and endowment life insurance.
Term Insurance
Term insurance provides life insurance coverage for a specified period of time. This policy does not accumulate cash value. Insurance futures are significantly cheaper than equivalent permanent policies but will become higher as they get older. Policyholders can save to provide long-term premiums or reduce insurance needs (by paying off debts or savings to meet survivors' needs).
Mortgage mortgages insure loans that are secured by real property and typically display a high premium amount for declining face value because what is insured is the principal and interest payable on a mortgage that is constantly reduced by mortgage. payment. The nominal amount of the policy is always the principal amount and the outstanding interest paid if the applicant dies before the last payment is paid.
Group life insurance
Group life insurance (also known as life insurance or institutional life insurance ) is term insurance covering a group of people, usually company employees, union members or associates, or members of a pension or pension fund. Individual evidence of insurability is usually not a consideration in its underwriting. Instead, the insurer perceives the size, rotation, and financial strength of the group. The terms of the contract will seek to exclude the possibility of reverse selection. Group life insurance often allows members who leave the group to maintain their coverage by purchasing individual coverage. Emission underwriting is for all groups, not individuals.
Permanent life insurance
Permanent life insurance is a life insurance covering the remaining life of the insured. The permanent insurance policy accumulates the cash value until the maturity date. Owners can access cash in cash value by withdrawing money, borrowing cash value, or submitting policies and receiving surrender value.
The three basic types of permanent insurance are whole life , universal life , and endowment .
Lifetime
The whole life insurance provides a lifetime guarantee for the set premium amount (see main article for a full explanation of the many variations and options).
Universal life span
Universal life insurance (ULl) is a relatively new insurance product, intended to combine permanent insurance coverage with greater flexibility in premium payments, along with greater growth potential for cash value. There are several types of universal life insurance policies, including interest-sensitive (also known as "traditional universal fixed life insurance"), universal life variable (VUL) , < death benefits , and have universal equity indexed life insurance .
Universal life insurance policies have a cash value. Premiums increase their cash value; administrative and other costs reduce their cash value.
Universal life insurance overcomes the perceived loss of life - that is, the benefits of premiums and deaths are fixed. With universal life, the benefits of premiums and deaths are flexible. With the exception of universal life-guaranteed life-benefits policies, universal life policies trade their greater flexibility with fewer guarantees.
"Flexible death benefit" means the policy owner may choose to reduce the death benefit. The benefits of death can also be increased by policy owners, usually requiring new guarantees. Another feature of the flexible death benefit is the ability to choose option A or option B of death benefit and to change those options during the life of the insured. Option A is often referred to as the "death benefit rate"; the death allowance remains the level for the life of the insured, and the premium is lower than the policy with the dead benefit Option B, which pays the cash value of the policy - that is, the face count plus the profit/interest. If the value of cash grows over time, the benefits of death will also occur. If the value of cash decreases, the death benefit also decreases. The Option B policy usually displays a higher premium than the policy option A.
Waqf
Endowment policy is a life insurance contract designed to pay the sum at once after a certain term (on 'maturity') or on death. Typical maturity is ten, fifteen or twenty years to a certain age. Some policies also pay in case of critical illness.
Policies are usually traditional with-profit or unit-linked (including those who are united with profit funds).
Waqf can be cashed at the beginning (or surrender) and the holder then receives the surrender value specified by the insurance company depending on how long the policy has run and how much has been paid into it.
Unintentional Death
Accident mortality insurance is a type of limited life insurance designed to protect the insured if they die from an accident. "Accidents" runs entirely from abrasions to disasters but usually do not include deaths caused by health problems that are not accident-related or suicidal. Since it only covers accidents, this policy is much cheaper than any other life insurance policy.
Such insurance can also be a death insurance and accidental deduction or AD & amp; D . In AD & D policies, benefits are available not only for accidental death but also for loss of limbs or body functions such as vision and hearing.
Unintentional mortality and AD & D policies rarely pay benefits, either because the cause of death is not covered by the policy or because death occurs well after the accident, at which time the premium has been paid. To know what coverage they have, the insured should always review their policies. Risky activities such as skydiving, flying, professional sports, or military service are often ignored from reach.
Accidental mortality insurance can also add standard life insurance as a rider. If a rider is purchased, the policy generally pays twice the amount of the down payment if the insured dies by accident. This was once called double indemnity insurance . In some cases, coverage of triple compensation may be available.
Senior and pre-requirement products
Insurance companies in recent years have developed products for specialty markets, primarily targeting the elderly in an aging population. This is a low-to-moderate lifetime life insurance policy, enabling senior citizens to purchase affordable insurance in the future. It can also be marketed as a end-cost insurance and usually has a death benefit of between $ 2,000 and $ 40,000. One reason for their popularity is that they only require answers to simple "yes" or "no" questions, while most policies require a medical examination to qualify. As with any other type of policy, the range of premiums can vary greatly and should be scrutinized before buying, as does the reliability of the company.
Health questions can vary widely between the exam and the no-test policy. It is possible for individuals with certain conditions to qualify for one type of coverage and not the other. Because seniors are sometimes not fully aware of policy requirements, it is important to ensure that the policy goes on for life and the premium does not increase every 5 years as usual in some circumstances.
Pre-requirements life insurance policy is a limited premium payment, a lifetime policy normally purchased by older applicants, even though they are available to everyone. This type of insurance is designed to cover the special funeral expenses that the applicant has appointed in the contract with the funeral home. The death benefits of the policy were originally based on funeral expenses at the time of the previous arrangement, and usually increased when interest was credited. In return for the appointment of the policy owner, the funeral home usually guarantees that the proceeds will cover the funeral expenses, no matter when the death occurred. Excess proceeds may enter the insured property, the designated beneficiary, or the funeral home as stated in the contract. Buyers of this policy typically make a single premium payment at the time of the previous arrangement, but some companies also allow premiums to be paid for ten years.
src: www.loanadvice.tk
Related products
Riders are modifications to the insurance policy added at the same time when the policy is issued. This rider changed the basic policy to provide some features desired by the policy owner. The general rider is accidental death (see above). Another common rider is a premium waiver , which frees up future premiums if the insured becomes disabled.
Joint Life Insurance is a term or permanent term life insurance that guarantees two or more persons, with the results paid on death good .
Unit Linked Insurance Plan
This is a unique insurance plan that is basically a mutual fund and a term insurance plan that rolled into one. The investor did not participate in the earnings of the plan per se, but received a refund on the return of the funds he chose.
See the main article for a full explanation of the various features and variations.
Profit policy
Some policies give policyholders a share of the profits of an insurance company - this is called profit policy. Other policies do not entitle the part of corporate profits - this is a non-profit policy.
Policy with profit is used as a form of collective investment scheme to achieve capital growth. Other policies offer guaranteed returns independent of the underlying corporate investment performance; this is often referred to as a no profit policy, which can be interpreted as a misnomer.
src: www.allstardirect.com
Taxation
Australia
Where life insurance is provided through pension funds, the contribution made to fund insurance premiums is a substantial deduction of taxes on entrepreneurs and entrepreneurs and entrepreneurs. However where life insurance is held outside the superannuation environment, premiums are generally not tax deductible. For insurance through superannuation funds, deductible annual contributions to superannuation funds are subject to age restrictions. This restriction applies to employers who make a deductible contribution. They also apply to people who are self-employed and substantially self-employed. Included in this overall limit is the insurance premium. This means that there are no additional deductible contributions that can be made to funding insurance premiums. Insurance premiums can, however, be funded by contributions that have not yet been disbursed. For more information about contributions that can be reduced, see "under what conditions can employers claim deductions for contributions made on behalf of their employees?" and "what is the definition of the entrepreneur substantially?". Insurance premiums paid by superannuation funds can be claimed by the fund as a deduction to reduce the 15% tax on contributions and revenues. (Ref: ITAA 1936, Section 279).
South Africa
Premiums paid by policyholders can not be deducted from taxable income, even though premiums paid through approved pension funds registered in the Income Tax Act are allowed to be deducted from personal income tax (whether this premium is nominally paid by employers or employees ). Benefits arising from life insurance policies are generally not taxed as income to beneficiaries (again in the case of approved benefits, these fall under pensions or withdrawal of taxation laws from SARS). Return on investment in the policy will be taxed in the life insurance policy and paid by the life insurance depending on the nature of the policyholder (whether natural person, company owned, unpaid or pension fund).
United States
Premiums paid by the policy owner are usually not deductible for federal and state income tax purposes, and the results paid by the insurer for the death of the insured are excluded from gross income for federal and state income tax purposes. However, if the results are included in the "property" of the deceased, they will likely be subject to property taxes and federal and state inheritance.
The increased cash value in the policy is not subject to income tax unless a particular event occurs. For this reason, an insurance policy can be a legal and legitimate tax shelter where savings may increase without tax until the owner withdraws money from the policy. In a flexible premium policy, large premium deposits may cause the contract to be considered as a modified endowment contract by the Internal Revenue Service (IRS), which eliminates many of the tax advantages associated with life insurance. Insurance companies, in most cases, will inform the owners of these hazard policies before deciding on their premiums.
The consequences of life insurance tax are very complex. Policy owners will be advised to consider carefully. As always, both the United States Congress and the state legislature can amend the tax laws at any time.
United Kingdom
Premiums are usually not deductible from corporate income taxes or taxes, but eligible policies issued before March 14, 1984 still attract LAPR (Life Assurance Premium Relief) of 15% (with net premiums collected from policyholders).
Non-investment living policies usually do not withdraw income tax or capital gains tax on claims. If the policy has elements of investment such as endowment policies, lifetime policies or investment bonds then the tax treatment is determined by the policy qualification status.
Qualification status is determined at the beginning of the policy if the contract meets certain criteria. In essence, long-term contracts (10 plus years) tend to be eligible policies and the results are free of income tax and capital gains tax. Single and short-term premium contracts subject to income tax depending on the marginal rate on the year profit is made. All UK insurance companies pay a special corporate tax rate on the profit of their life books; this is considered a lower level meeting (20% in 2005-06) obligations for policyholders. Therefore, policyholders who are high-level taxpayers (40% in 2005-06), or being one through transactions, must pay taxes on gains on the difference between the higher and the lower rates. This advantage is reduced by applying a calculation called top-slicing based on the number of years the policy has been held. While this is complicated, taxation of guarantee-based investment contracts can be useful compared to alternative collective investment-based collective investment schemes (unit trusts, investment trusts and OEICs). One feature that primarily supports investment bonds is '5% cumulative allowance' - the ability to withdraw 5% of the initial investment amount each policy year without being taxed on the withdrawn amount. If not used within one year, a 5% allowance may roll over to future years, subject to maximum withholding tax 100% of the premium payable. This withdrawal is deemed by HMRC (Excise Revenue and Customs) as payment of capital and therefore, tax liability is deferred to maturity or policy surrender. This is a very useful tax planning tool for high-end taxpayers who expect to be a bottom-level taxpayer at a predictable future point, because at this point the deferred tax liability will not cause the tax due.
The results of the living policy will be included in the estate for duty of death (in England, inheritance tax) purposes. Policies written in trust may fall outside the plantation. The trust and taxation laws of the trust can be complicated, so that any individual who wishes to use the trust for tax planning will usually seek professional advice from an Independent Financial Advisor and/or attorney.
Retirement benefits
Although available before April 2006, the current pension benefits become widely available in the UK. Most UK insurance companies adopted the name "life insurance with tax breaks" for the product. The pension guarantee is an effective life-long guarantee with premium tax breaks. All premiums are paid at a basic tax rate of 22%, and higher taxpayers can get an additional 18% tax relief through their tax return. Though unsuitable for all, the PTA briefly became one of the most common forms of life insurance sold in the UK until, Chancellor Gordon Brown announced the withdrawal of the scheme in the pre-budget announcement on December 6, 2006.
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Stranger comes
Life insurance originating from a foreigner or STOLI is a life insurance policy held or financed by a person who has no relationship with the insured person. Generally, the purpose of life insurance is to provide peace of mind by ensuring that financial losses or difficulties will be reduced in case of death of an insured person. STOLY is often used as an investment technique in which investors will encourage someone (usually an elderly person) to buy life insurance and name investors as beneficiaries of the policy. This undermines the main purpose of life insurance, as investors will not bear the financial loss if the insured person dies. In some jurisdictions, there are laws to prevent or prevent STOLY.
src: www.moneysense.ca
Criticism
Although some aspects of the application process (such as underwriting and insurable provisions) make it difficult, life insurance policies have been used to facilitate exploitation and fraud. In the case of life insurance, there is the possibility of motive to buy a life insurance policy, especially if the nominal value is large enough, and then kill the insured. Usually, the bigger the claim, and the more serious the incident, the bigger and more intense the next investigation, which consists of police and insurance researchers.
The TV series Forensic Files has included an episode showing this scenario. There were also cases documented in 2006, in which two elderly women were accused of taking homeless men and helping them. As part of their help, they take life insurance for men. After the period of contestability ended in policy, the women allegedly had people killed by a hit-and-run car crash.
Recently, neglectful settlements have created problems for life insurance providers. A realistic settlement involves the purchase of a life insurance policy from an old or severely ill policyholder. The policyholder sells the policy (including the right to name the recipient) to the buyer at a discounted price of the policy value. The seller has the cash in hand, and the buyer will reap the profits when the seller dies and the results are sent to the buyer. Meanwhile, buyers continue to pay premiums. Although both parties have achieved a nice settlement, the insurance company is distracted by this trend. Insurers calculate their rates under the assumption that certain portions of policyholders will seek to redeem the cash value of their insurance policy before death. They also hope that some will stop paying premiums and lose their policies. However, a realistic settlement ensures that the policy will be with absolute certainty to be paid. Some buyers, to take advantage of the huge profit potential, are even actively trying to collude with elderly uninsured and severely ill patients, and make policies that will not be bought. These policies are guaranteed losses from the perspective of the insurance company.
On April 17, 2016, a report by 60 Minutes stated that life insurance companies did not pay significant beneficiaries.
src: www.nerdwallet.com
See also
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References
Custom reference
- Source
- Kutty, Shashidharan (August 12, 2008). Managing Life Insurance . PHI Learning Pvt. Ltd. ISBN 978-81-203-3531-8.
- Oviatt, F. C. "The place of the insurance economy and its relationship with the public" in the American Academy of Political and Social Academy History of the American Academy of Political and Social Sciences . XXVI . Published by A.L. Hummel for the American Academy of Political and Social Sciences. pp.Ã, 181-191 . Retrieved June 8 2011 .
- Rothstein, Mark A. (2004). Genetics and Life Insurance: Medical Guarantee and Social Policy . MIT Press. ISBN 978-0-262-18236-2.
src: fpgindia.org
External links
- Learn About Life Insurance - Insurance Information Center Life Insurance Learning Center
- History of Life Insurance in the United States through World War I
Source of the article : Wikipedia
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