Life Insurance

Life insurance is designed to provide the designated beneficiary of an individual, typically a family member, with the assurance that the insured's death will not bring them financial burdens. This particular form of insurance is a contract in which a company agrees to pay a predetermined sum of money to a designated beneficiary when the insured person dies. Upon their death, a lump sum of money is paid to the beneficiary by the insurance company.

How It Works

The insurance companies profit by taking in more money each year in premiums than the amount they pay out each year to beneficiaries. The premiums for each life insurance policy received by the insurance company enter a pool of money that is then used by the company to pay claims and annual operating costs. The insurance company may also invest a part of the money to gain a profit, and grow their financial resources. 

Eligibility

Life insurance companies use a process of investigation called underwriting before issuing a person a life insurance policy. The individual is questioned about his or her lifestyle and health to gain a better understanding of how soon they may become deceased, aside from a sudden accident. In case of unfavorable replies, further investigation is then done before issuing the person's insurance policy. This process ensures that the customer is charged the appropriate premium amount, based on their potential risk of death according to their health, age and lifestyle. 

Benefits 

In the event that a person holding life insurance does die, their beneficiaries receive a lump sum payment. Beneficiaries are anyone one person or multiple people named by the insured person, and are typically a spouse or children. If, however, the insured individual dies as a result of officially excluded causes, the beneficiaries will not receive their payment. Several causes of death possibly excluded from life insurance coverage include:

• Suicide
• War
• Riot
• Fraud 

Pricing 

The price of your life insurance policy is determined by insurance company employees known as actuaries. Their job is to calculate the potential insured person's risk of death by using "mortality tables". Mortality tables use mathematics and statistics to predict mortality rates, and can even incorporate family medical history, tobacco use and gender. 

Types Of Life Insurance 

Term Life Insurance: This policy is designed to exist only for a predetermined amount of time, typically one year, for a specific premium. If the insured dies before the specified term is up, the beneficiaries receive their payment. If the policy holder does not die within the life of the policy, no payment is made. The value of your term life insurance is affected by the length of time you plan to purchase it for, the amount of money paid for it, and the amount awarded to your beneficiaries in the event of your death. 

Permanent Life Insurance:

Rather than being purchased for a short period of time, like term insurance, permanent life insurance is designed to be in effect for the lifetime of the insured. Types of permanent life insurance include:

• Whole Life Insurance: This form of term life insurance is designed to accrue cash value throughout the lifetime of the insured, which can be used during the insured's life, but is to be paid back, or added to monthly premiums. Upon their death, a death benefit is paid to the beneficiary. The premium remains the same throughout the insured's lifetime.
• Universal Life Insurance: This form of life insurance offers a flexible premium and adjustable death benefit, allowing you to alter your policy as your budget or needs change. Death benefits are typically tax free for the beneficiary.
• Variable Life Insurance: While they may be the most expensive permanent life insurance, variable policy offer the ability to invest part of the policy holder's premium in the insurance company's portfolio of stocks, bonds and funds. 

Major Life Insurance Companies 

Within the United States, some major life insurance companies include:

• 21^st Century
• AIG Life
• Allstate
• Colonial Penn
• Farmers
• Hartford Life
• Fidelty
• Liberty Mutual
• MetLife
• Prudential
• State Farm