Insurance involves transferring a risk that you bare, onto an insurance company, so that you no longer have to worry
about the event occurring. While you pay a fee, or premium for this, what you get in return is peace of mind. So what
is the risk that you are transferring with life insurance? Well, quite simply, it is the financial risk of your own death. It
should also be remembered that it is in certain circumstances possible to insure the life of another person, such as
your husband or wife, or an important employee. The insurance company will then pay out to the named beneficiary
once the event occurs, and this is usually a family member or business associate of the insured.
The thing that insurance companies will be looking for is insurable interest. It may come as a surprise but in the early
days of aviation, there were some clever entrepreneurs who would hang around at airports and buy life insurance
policies on the passengers. Since plane crashes were very common, a good proportion of the insured passengers died
and the insurance companies were faced with the prospect of paying out vast sums to these men.
This is not the reason insurance was developed and the system was not designed to cope with this kind of speculation.
Therefore the rule developed that you could only insure the life of someone you had a real interest in surviving. There
is also the public policy issue that it would be tempting to some people to insure strangers and then make sure they
died soon.
The insurance policy will have two important details defined right at the outset. The first is who is to be paid out under
the policy. While this seems obvious, it is important to think carefully about it as, unlike in most insurance contracts,
the purchaser of the policy is rarely the beneficiary under a life insurance policy.
The second is the amount to be paid out on to occurrence of the event. It must be remembered that this is also subject
to the rule of insurable interest and therefore you cannot have a policy on your life for more than your life is
reasonably financially worth. Since the premium is partially calculated on the amount of the payout, you will simply be
paying for more insurance than you can receive. Therefore be honest with how much you earn and how much support
your providing to your family so that the premium will be accurately assessed.
Article Source: http://www.Free-Articles-Zone.com-By Joseph Kenny
about the event occurring. While you pay a fee, or premium for this, what you get in return is peace of mind. So what
is the risk that you are transferring with life insurance? Well, quite simply, it is the financial risk of your own death. It
should also be remembered that it is in certain circumstances possible to insure the life of another person, such as
your husband or wife, or an important employee. The insurance company will then pay out to the named beneficiary
once the event occurs, and this is usually a family member or business associate of the insured.
The thing that insurance companies will be looking for is insurable interest. It may come as a surprise but in the early
days of aviation, there were some clever entrepreneurs who would hang around at airports and buy life insurance
policies on the passengers. Since plane crashes were very common, a good proportion of the insured passengers died
and the insurance companies were faced with the prospect of paying out vast sums to these men.
This is not the reason insurance was developed and the system was not designed to cope with this kind of speculation.
Therefore the rule developed that you could only insure the life of someone you had a real interest in surviving. There
is also the public policy issue that it would be tempting to some people to insure strangers and then make sure they
died soon.
The insurance policy will have two important details defined right at the outset. The first is who is to be paid out under
the policy. While this seems obvious, it is important to think carefully about it as, unlike in most insurance contracts,
the purchaser of the policy is rarely the beneficiary under a life insurance policy.
The second is the amount to be paid out on to occurrence of the event. It must be remembered that this is also subject
to the rule of insurable interest and therefore you cannot have a policy on your life for more than your life is
reasonably financially worth. Since the premium is partially calculated on the amount of the payout, you will simply be
paying for more insurance than you can receive. Therefore be honest with how much you earn and how much support
your providing to your family so that the premium will be accurately assessed.
Article Source: http://www.Free-Articles-Zone.com-By Joseph Kenny
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