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Encyclopedia > Life Insurance

Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individual's or individuals' death. In return, the policy owner (or policy payer) agrees to pay a stipulated amount called a premium at regular intervals or in lump sums( so-called "paid up" insurance). There may be designs in some countries where: (Assets, Bills, and death expenses plus catering for after funeral expenses should be included in Policy Premium. Anyone whose assets equal more than the value of their primary residence should not be compensated beyond that value in case they cannot sell their house. In the case of those whose lost their spouse should be compensated also for one full year the wages of their spouse which would or should be included to avoid lawsuits.) However in the United States, the predominant form simply specifies a lump sum to be paid on the insured's demise. Image File history File links Broom_icon. ...


As with most insurance polices, life insurance is a contract between the insurer and the policy owner (policyholder) whereby a benefit is paid to the designated Beneficiary (or Beneficiaries) if an insured event occurs which is covered by the policy. To be a life policy the insured event must be based upon life (or lives) of the people named in the policy. Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. ...


Insured events that may be covered include:

  • death
  • accidental death
  • Sickness

Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to suicide (after 2 years suicide has to be paid in full)(in India after one year Suicide is covered), fraud, war, riot and civil commotion.


Life based contracts tend to fall into two major categories:

  • Protection policies - designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.
  • Investment policies - where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US anyway) are whole life, universal life and variable life policies.

Contents

Look up Protection in Wiktionary, the free dictionary. ... Invest redirects here. ...

Parties to contract

There is a difference between the insured and the policy owner (policy holder), although the owner and the insured are often the same person. For example, if Joe buys a policy on his own life, he is both the owner and the insured. But if Jane, his wife, buys a policy on Joe's life, she is the owner and he is the insured. The policy owner is the guarantee and he or she will be the person who will pay for the policy. The insured is a participant in the contract, but not necessarily a party to it.


The beneficiary receives policy proceeds upon the insured's death. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner may change the beneficiary unless the policy has an irrevocable beneficiary designation. With an irrevocable beneficiary, that beneficiary must agree to any beneficiary changes, policy assignments, or cash value borrowing.


In cases where the policy owner is not the insured (also referred to as the cestui qui vit or CQV), insurance companies have sought to limit policy purchases to those with an "insurable interest" in the CQV. For life insurance policies, close family members and business partners will usually be found to have an insurable interest. The "insurable interest" requirement usually demonstrates that the purchaser will actually suffer some kind of loss if the CQV dies. Such a requirement prevents people from benefiting from the purchase of purely speculative policies on people they expect to die. With no insurable interest requirement, the risk that a purchaser would murder the CQV for insurance proceeds would be great. In at least one case, an insurance company which sold a policy to a purchaser with no insurable interest (who later murdered the CQV for the proceeds), was found liable in court for contributing to the wrongful death of the victim (Liberty National Life v. Weldon, 267 Ala.171 (1957)).


Contract terms

Special provisions may apply, such as suicide clauses wherein the policy becomes null if the insured commits suicide within a specified time (usually two years after the purchase date; some states provide a statutory one-year suicide clause). Any misrepresentations by the insured on the application is also grounds for nullification. Most US states specify that the contestability period cannot be longer than two years; only if the insured dies within this period will the insurer have a legal right to contest the claim on the basis of misrepresentation and request additional information before deciding to pay or deny the claim.


The face amount on the policy is the initial amount that the policy will pay at the death of the insured or when the policy matures, although the actual death benefit can provide for greater or lesser than the face amount. The policy matures when the insured dies or reaches a specified age (such as 100 years old).


Costs, insurability, and underwriting

The insurer (the life insurance company) calculates the policy prices with an intent to fund claims to be paid and administrative costs, and to make a profit. The cost of insurance is determined using mortality tables calculated by actuaries. Actuaries are professionals who employ actuarial science, which is based in mathematics (primarily probability and statistics). Mortality tables are statistically-based tables showing expected annual mortality rates. It is possible to derive life expectancy estimates from these mortality assumptions. Such estimates can be important in taxation regulation.[1] [2] Damage from Hurricane Katrina. ...


The three main variables in a mortality table have been age, gender, and use of tobacco. More recently in the US, preferred class specific tables were introduced. The mortality tables provide a baseline for the cost of insurance. In practice, these mortality tables are used in conjunction with the health and family history of the individual applying for a policy in order to determine premiums and insurability. Mortality tables currently in use by life insurance companies in the United States are individually modified by each company using pooled industry experience studies as a starting point. In the 1980s and 90's the SOA 1975-80 Basic Select & Ultimate tables were the typical reference points, while the 2001 VBT and 2001 CSO tables were published more recently. The newer tables include separate mortality tables for smokers and non-smokers and the CSO tables include separate tables for preferred classes. [3]


Recent US select mortality tables predict that roughly 0.35 in 1,000 non-smoking males aged 25 will die during the first year of coverage after underwriting.[4] Mortality approximately doubles for every extra ten years of age so that the mortality rate in the first year for underwritten non-smoking men is about 2.5 in 1,000 people at age 65.[5] Compare this with the US population male mortality rates of 1.3 per 1,000 at age 25 and 19.3 at age 65 (without regard to health or smoking status).[6]


The mortality of underwritten persons rises much more quickly that the general population. At the end of 10 years the mortality of that 25 year-old, non-smoking male is 0.66/1000/year. Consequently, in a group of one thousand 25 year old males with a $100,000 policy, all of average health, a life insurance company would have to collect approximately $50 a year from each of a large group to cover the relatively few expected claims. (0.35 to 0.66 expected deaths in each year x $100,000 payout per death = $35 per policy). Administrative and sales commissions need to be accounted for in order for this to make business sense. A 10 year policy for a 25 year old non-smoking male person with preferred medical history may get offers as low as $90 per year for a $100,000 policy in the competitive US life insurance market.


The insurance company receives the premiums from the policy owner and invests them to create a pool of money from which it can pay claims and finance the insurance company's operations. Contrary to popular belief, the majority of the money that insurance companies make comes directly from premiums paid, as money gained through investment of premiums can never, in even the most ideal market conditions, vest enough money per year to pay out claims.[citation needed] Rates charged for life insurance increase with the insured's age because, statistically, people are more likely to die as they get older.


Given that adverse selection can have a negative impact on the insurer's financial situation, the insurer investigates each proposed insured individual unless the policy is below a company-established minimum amount, beginning with the application process. Group Insurance policies are an exception.


This investigation and resulting evaluation of the risk is termed underwriting. Health and lifestyle questions are asked. Certain responses or information received may merit further investigation. Life insurance companies in the United States support the Medical Information Bureau(MIB) [7], which is a clearinghouse of information on persons who have applied for life insurance with participating companies in the last seven years. As part of the application, the insurer receives permission to obtain information from the proposed insured's physicians.[8] Underwriting refers to the process that a large financial service provider (bank, insurer, investment house) uses to assess the eligibility of a customer to receive their products like equity capital, insurance or credit to a customer. ...


Underwriters will determine the purpose of insurance. The most common is to protect the owner's family or financial interests in the event of the insured's demise. Other purposes include estate planning or, in the case of cash-value contracts, investment for retirement planning. Bank loans or buy-sell provisions of business agreements are another acceptable purpose.


Life insurance companies are never required by law to underwrite or to provide coverage to anyone, with the exception of Civil Rights Act compliance requirements. Insurance companies alone determine insurability, and some people, for their own health or lifestyle reasons, are deemed uninsurable. The policy can be declined (turned down) or rated.[citation needed] Rating increases the premiums to provide for additional risks relative to the particular insured.[citation needed]


Many companies use four general health categories for those evaluated for a life insurance policy. These categories are Preferred Best, Preferred, Standard, and Tobacco.[citation needed] Preferred Best is reserved only for the healthiest individuals in the general population. This means, for instance, that the proposed insured has no adverse medical history, is not under medication for any condition, and his family (immediate and extended) have no history of early cancer, diabetes, or other conditions.[citation needed] Preferred means that the proposed insured is currently under medication for a medical condition and has a family history of particular illnesses.[citation needed] Most people are in the Standard category.[citation needed] Profession, travel, and lifestyle factor into whether the proposed insured will be granted a policy, and which category the insured falls. For example, a person who would otherwise be classified as Preferred Best may be denied a policy if he or she travels to a high risk country.[citation needed] Underwriting practices can vary from insurer to insurer which provide for more competitive offers in certain circumstances.


Life insurance contracts are written on the basis of utmost good faith. That is, the proposer and the insurer both accept that the other is acting in good faith. This means that the proposer can assume the contract offers what it represents without having to fine comb the small print and the insurer assumes the proposer is being honest when providing details to underwriter.[citation needed]


Death proceeds

Upon the insured's death, the insurer requires acceptable proof of death before it pays the claim. The normal minimum proof required is a death certificate and the insurer's claim form completed, signed (and typically notarized).[citation needed] If the insured's death is suspicious and the policy amount is large, the insurer may investigate the circumstances surrounding the death before deciding whether it has an obligation to pay the claim.


Proceeds from the policy may be paid as a lump sum or as an annuity, which is paid over time in regular recurring payments for either a specified period or for a beneficiary's lifetime.[citation needed]


Insurance vs. assurance

Outside the United States, the specific uses of the terms "insurance" and "assurance" are sometimes confused. In general, in these jurisdictions "insurance" refers to providing cover for an event that might happen, while "assurance" is the provision of cover for an event that is certain to happen. However, in the United States both forms of coverage are called "insurance".


When a person insures the contents of their home they do so because of events that might happen (fire, theft, flood, etc.) They hope their home will never be burglarized, or burn down, but they want to ensure that they are financially protected if the worst happens. This example of Insurance shows how it is a way of spending a little money to protect against the risk of having to spend a lot of money. Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. ... For the Parker Brothers board game, see Risk (game) For other uses, see Risk (disambiguation). ...


When a person insures their life they do so knowing that one day they will die. Therefore a policy that covers death is assured to make a payment. The policy offers assurance on death; even if the policy has a prescribed termination date the policy is still assured to pay on death and therefore is an assurance policy. Examples include Term Assurance and Whole Life Assurance. An accidental death policy is not assured to pay on death as the life insured may not die through an accident, therefore it is an insurance policy. Term life insurance is the original form of life insurance and is considered to be pure insurance protection because it builds no cash value. ... Whole life insurance, or Whole of Life Assurance, refers to a policy that pays a lump sum on death or, in some cases, the earlier diagnosis of a critical illness whenever it occurs provided the contract is kept in force through the required payments being made. ...


A policy might also be assured for other reasons. For example an endowment policy is designed to provide a lump sum on maturity. Under certain types of policy the lump sum is guaranteed. Therefore, this may also be called an assurance policy. An endowment policy is a life assurance contract designed to pay a lump sum after a specified term or on earlier death (some policies also include critical illness as condition of payout). ...


The test of whether a policy is assurance or insurance is that with an assurance policy the insured event will definitely occur (at some point) whereas with an insurance policy there is a risk the insured event might occur.


With regard to Whole Life policies, the question is not whether the insured event (in this case death) will occur, but simply when. If the policy has nonforfeiture values (or cash values) then the policy is assured to pay.


During recent years, the distinction between the two terms has become largely blurred. This is principally due to many companies offering both types of policy, and rather than refer to themselves using both insurance and assurance titles, they instead use just one.


Types of life insurance

Life insurance may be divided into two basic classes – temporary and permanent or following subclasses - term, universal, whole life, variable, variable universal and endowment life insurance.


Temporary (Term)

Term life insurance (term assurance in British English) provides for life insurance coverage for a specified term of years for a specified premium. The policy does not accumulate cash value. Term is generally considered "pure" insurance, where the premium buys protection in the event of death and nothing else. (See Theory of Decreasing Responsibility and buy term and invest the difference.) Term insurance premiums are typically low because both the insurer and the policy owner agree that the death of the insured is unlikely during the term of coverage. Term life insurance is the original form of life insurance and is considered to be pure insurance protection because it builds no cash value. ... Look up premium in Wiktionary, the free dictionary A Premium may refer to: Premium rate telephone number, the UK Premium Bond Premium outlet Risk premium, in finance, the monetary difference between the guaranteed return and the possible return on an investment This is a disambiguation page — a navigational aid which... The Theory of Decreasing Responsibility is an insurance sales philosophy promoted by Primerica relating to term life insurance. ... To meet Wikipedias quality standards, this article or section may require cleanup. ...


The three key factors to be considered in term insurance are: face amount (protection or death benefit), premium to be paid (cost to the insured), and length of coverage (term).


Various (U.S.) insurance companies sell term insurance with many different combinations of these three parameters. The face amount can remain constant or decline. The term can be for one or more years. The premium can remain level or increase. A common type of term is called annual renewable term. It is a one year policy but the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time. Another common type of term insurance is mortgage insurance, which is usually a level premium, declining face value policy. The face amount is intended to equal the amount of the mortgage on the policy owner’s residence so the mortgage will be paid if the insured dies. For other uses of terms redirecting here, see US (disambiguation), USA (disambiguation), and United States (disambiguation) Motto In God We Trust(since 1956) (From Many, One; Latin, traditional) Anthem The Star-Spangled Banner Capital Washington, D.C. Largest city New York City National language English (de facto)1 Demonym American...


A policy holder insures his life for a specified term. If he dies before that specified term is up, his estate or named beneficiary(ies) receive(s) a payout. If he does not die before the term is up, he receives nothing. In the past these policies would almost always exclude suicide. However, after a number of court judgments against the industry, payouts do occur on death by suicide (presumably except for in the unlikely case that it can be shown that the suicide was just to benefit from the policy). Generally, if an insured person commits suicide within the first two policy years, the insurer will return the premiums paid. However, a death benefit will usually be paid if the suicide occurs after the two year period. ŞΕŁ


Permanent

Permanent life insurance is life insurance that remains in force (in-line) until the policy matures (pays out), unless the owner fails to pay the premium when due (the policy expires). The policy cannot be canceled by the insurer for any reason except fraud in the application, and that cancellation must occur within a period of time defined by law (usually two years). Permanent insurance builds a cash value that reduces the amount at risk to the insurance company and thus the insurance expense over time. This means that a policy with a million dollars face value can be relatively inexpensive to a 70 year old because the actual amount of insurance purchased is much less than one million dollars. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value. The examples and perspective in this article or section may not represent a worldwide view. ...


The three basic types of permanent insurance are whole life, universal life, and endowment.


Whole life coverage

Whole life insurance provides for a level premium, and a cash value table included in the policy guaranteed by the company. The primary advantages of whole life are guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges will not reduce the cash value shown in the policy. The primary disadvantages of whole life are premium inflexibility, and the internal rate of return in the policy may not be competitive with other savings alternatives. Riders are available that can allow one to increase the death benefit by paying additional premium. The death benefit can also be increased through the use of policy dividends. Dividends cannot be guaranteed and may be higher or lower than historical rates over time. Premiums are much higher than term insurance in the short-term, but cumulative premiums are roughly equal if policies are kept in force until average life expectancy. Whole life insurance, or Whole of Life Assurance, refers to a policy that pays a lump sum on death or, in some cases, the earlier diagnosis of a critical illness whenever it occurs provided the contract is kept in force through the required payments being made. ...


Cash value can be accessed at any time through policy "loans". Since these loans decrease the death benefit if not paid back, payback is optional. Cash values are not paid to the beneficiary upon the death of the insured; the beneficiary receives the death benefit only. In many policies, however, the cash value has been automatically used to purchase additional death benefit, meaning that the beneficiary is likely to receive more than base death benefit plus cash value.


Universal life coverage

Universal life insurance (UL) is a relatively new insurance product intended to provide permanent insurance coverage with greater flexibility in premium payment and the potential for a higher internal rate of return. A universal life policy includes a cash account. Premiums increase the cash account. Interest is paid within the policy (credited) on the account at a rate specified by the company. This rate has a guaranteed minimum but usually is higher than that minimum. Mortality charges and administrative costs are charged against (reduce) the cash account. The surrender value of the policy is the amount remaining in the cash account less applicable surrender charges, if any. Universal Life (UL) is a type of permanent life insurance based on a cash value. ...


With all life insurance, there are basically two functions that make it work. There's a mortality function and a cash function. The mortality function would be the classical notion of pooling risk where the premiums paid by everybody else would cover the death benefit for the one or two who will die for a given period of time. The cash function inherent in all life insurance says that if a person is to reach age 95 to 100 (the age varies depending on state and company), then the policy matures and endows the face value of the policy.


Actuarially, it is reasoned that out of a group of 1000 people, if even 10 of them live to age 95, then the mortality function alone will not be able to cover the cash function. So in order to cover the cash function, a minimum rate of investment return on the premiums will be required in the event that a policy matures.


Universal life policies guarantee, to some extent, the death proceeds, but not the cash function - thus the flexible premiums and interest returns. If interest rates are high, then the dividends help reduce premiums. If interest rates are low, then the customer would have to pay additional premiums in order to keep the policy in force. When interest rates are above the minimum required, then the customer has the flexibility to pay less as investment returns cover the remainder to keep the policy in force.


The universal life policy addresses the perceived disadvantages of whole life. Premiums are flexible. The internal rate of return is usually higher because it moves with the financial markets. Mortality costs and administrative charges are known. And cash value may be considered more easily attainable because the owner can discontinue premiums if the cash value allows it. And universal life has a more flexible death benefit because the owner can select one of two death benefit options, Option A and Option B.


Option A pays the face amount at death as it's designed to have the cash value equal the death benefit at age 95. Option B pays the face amount plus the cash value, as it's designed to increase the net death benefit as cash values accumulate. Option B does carry with it a caveat. This caveat is that in order for the policy to keep its tax favored life insurance status, it must stay within a corridor specified by state and federal laws that prevent abuses such as attaching a million dollars in cash value to a two dollar insurance policy. The interesting part about this corridor is that for those people who can make it to age 95-100, this corridor requirement goes away and your cash value can equal exactly the face amount of insurance. If this corridor is ever violated, then the universal life policy will be treated as, and in effect turn into, a Modified Endowment Contract (or more commonly referred to as a MEC). An endowment policy is a life assurance contract designed to pay a lump sum after a specified term or on earlier death (some policies also include critical illness as condition of payout). ...


But universal life has its own disadvantages which stem primarily from this flexibility. The policy lacks the fundamental guarantee that the policy will be in force unless sufficient premiums have been paid and cash values are not guaranteed.


Universal life policies are sometimes erroneously referred to as self-sustaining policies. In the 1980s, when interest rates were high, the cash value accumulated at a more accelerated rate, and universal life coverage was often sold by agents as a policy that could be self-paying. Many policies did sustain themselves for a prolonged period, but the combination of lower interest rates and an increasing cost of insurance as the insured ages meant that for many policies, the cash option was diminished or depleted.


Variable universal life Insurance (VUL) is not the same as universal life, even though they both have cash values attached to them. These differences are in how the cash accounts are managed; thus having a great effect on how they are treated for taxation. The cash account within a VUL is held in the insurer's "separate account" (generally in mutual funds, managed by a fund manager). It has been suggested that Variable universal life Insurance be merged into this article or section. ...


Limited-pay

Another type of permanent insurance is Limited-pay life insurance, in which all the premiums are paid over a specified period after which no additional premiums are due to keep the policy in force. Common limited pay periods include 10-year, 20-year, and paid-up at age 65.


Endowments

Main article: Endowment policy

Endowments are policies in which the cash value built up inside the policy, equals the death benefit (face amount) at a certain age. The age this commences is known as the endowment age. Endowments are considerably more expensive (in terms of annual premiums) than either whole life or universal life because the premium paying period is shortened and the endowment date is earlier. An endowment policy is a life assurance contract designed to pay a lump sum after a specified term or on earlier death (some policies also include critical illness as condition of payout). ... An endowment policy is a life assurance contract designed to pay a lump sum after a specified term or on earlier death (some policies also include critical illness as condition of payout). ...


In the United States, the Technical Corrections Act of 1988 tightened the rules on tax shelters (creating modified endowments). These follow tax rules as annuities and IRAs do. An endowment policy is a life assurance contract designed to pay a lump sum after a specified term or on earlier death (some policies also include critical illness as condition of payout). ... An annuity is an insurance contract. ...


Endowment Insurance is paid out whether the insured lives or dies, after a specific period (e.g. 15 years) or a specific age (e.g. 65).


Accidental death

Accidental death is a limited life insurance that is designed to cover the insured when they pass away due to an accident. Accidents include anything from an injury, but do not typically cover any deaths resulting from health problems or suicide. Because they only cover accidents, these policies are much less expensive than other life insurances.


It is also very commonly offered as "accidental death and dismemberment insurance", also known as an AD&D policy. In an AD&D policy, benefits are available not only for accidental death, but also for loss of limbs or bodily functions such as sight and hearing, etc. Accidental death and dismemberment insurance (also known as AD&D) covers death or dismemberment as a result of an accident. ...


Accidental death and AD&D policies very rarely pay a benefit; either the cause of death is not covered, or the coverage is not maintained after the accident until death occurs. To be aware of what coverage they have, an insured should always review their policy for what it covers and what it excludes. Often, it does not cover an insured who puts themselves at risk in activities such as: parachuting, flying an airplane, professional sports, or involvement in a war (military or not). Also, some insurers will exclude death and injury caused by proximate causes due to (but not limited to) racing on wheels and mountaineering.


Accidental death benefits can also be added to a standard life insurance policy as a rider. If this rider is purchased, the policy will generally pay double the face amount if the insured dies due to an accident. This used to be commonly referred to as a double indemnity coverage. In some cases, some companies may even offer a triple indemnity cover. Double Indemnity is a 1944 film noir. ...


Related life insurance products

Riders are modifications to the insurance policy added at the same time the policy is issued. These riders change the basic policy to provide some feature desired by the policy owner. A common rider is accidental death, which used to be commonly referred to as "double indemnity", which pays twice the amount of the policy face value if death results from accidental causes, as if both a full coverage policy and an accidental death policy were in effect on the insured. Another common rider is premium waiver, which waives future premiums if the insured becomes disabled.


Joint life insurance is either a term or permanent policy insuring two or more lives with the proceeds payable on the first death.


Survivorship life or second-to-die life is a whole life policy insuring two lives with the proceeds payable on the second (later) death.


Single premium whole life is a policy with only one premium which is payable at the time the policy is issued.


Modified whole life is a whole life policy that charges smaller premiums for a specified period of time after which the premiums increase for the remainder of the policy.


Group life insurance is term insurance covering a group of people, usually employees of a company or members of a union or association. Individual proof of insurability is not normally a consideration in the underwriting. Rather, the underwriter considers the size and turnover of the group, and the financial strength of the group. Contract provisions will attempt to exclude the possibility of adverse selection. Group life insurance often has a provision that a member exiting the group has the right to buy individual insurance coverage.


Senior and preneed products

Insurance companies have in recent years developed products to offer to niche markets, most notably targeting the senior market to address needs of an aging population. Many companies offer policies tailored to the needs of senior applicants. These are often low to moderate face value whole life insurance policies, to allow a senior citizen purchasing insurance at an older issue age an opportunity to buy affordable insurance. This may also be marketed as final expense insurance, and an agent or company may suggest (but not require) that the policy proceeds could be used for end-of-life expenses.


Preneed (or prepaid) insurance policies are whole life policies that, although available at any age, are usually offered to older applicants as well. This type of insurance is designed specifically to cover funeral expenses when the insured person dies. In many cases, the applicant signs a prefunded funeral arrangement with a funeral home at the time the policy is applied for. The death proceeds are then guaranteed to be directed first to the funeral services provider for payment of services rendered. Most contracts dictate that any excess proceeds will go either to the insured's estate or a designated beneficiary. For other uses, see Funeral (disambiguation). ... This article or section does not cite its references or sources. ...


These products are sometimes assigned into a trust at the time of issue, or shortly after issue. The policies are irrevocably assigned to the trust, and the trust becomes the owner. Since a whole life policy has a cash value component, and a loan provision, it may be considered an asset; assigning the policy to a trust means that it can no longer be considered an asset for that individual. This can impact an individual's ability to qualify for Medicare or Medicaid.



Introduction: You can buy life insurance either as an “individual” or as part of a “group” plan.


Individual Policy


When you buy an individual policy, you choose the company, the plan, and the benefits and features that are right for you and your family. You might be able to buy the policy from the same agent or company representative who sells you property and liability insurance for your home, auto or business. And although you won’t qualify for any discounts by buying your life insurance and other insurance from the same representative, working with a single advisor for all your insurance needs can make your financial life simpler.


Individual policies are typically sold through insurance agents or brokers. If you buy a policy through an agent or broker, you will pay a commission, also called a “load,” that is built into the premium rate. The commission compensates the agent or broker for the time spent advising you on how much and what type of life insurance to buy, for facilitating the application process, and for any further service that’s needed in future years to keep the policy up-to-date (such as changing beneficiary designations, arranging policy loans or coordinating your financial plans with your lawyer and accountant).


There are two other ways to buy individual life insurance. In Connecticut, Massachusetts and New York, you can buy it from a savings bank. Or you can buy a policy directly from an insurance company or from a fee-only financial advisor—what’s known as a “no load” or “low load” policy. Although there is no sales commission on these policies, the company will still have charges built into the premium to cover its marketing expenses, application processing expenses and subsequent services. Finding an insurance company that will sell you a no-load policy isn’t easy; typing in “no load life insurance” on Internet search engines will in many cases lead you to an agent or broker.


Group Policy


You might have life insurance automatically from your employer; many large companies do this. Your employer also might offer you the chance to buy additional life insurance under a group policy. And you might be eligible to buy life insurance under a group policy from a union or trade association or other group you belong to (such as a college alumni association or an automobile club).


Compared to buying an individual life insurance policy, there are several advantages to buying life insurance under a group policy:


Group purchase can sometimes offer you a lower rate for a given death benefit either because the employer or other group sponsor subsidizes the premium or because the rates are averages weighted by people younger than you.


There are virtually no health qualifications for getting the group coverage.


Premium payment is usually by payroll deduction (for employer-based group coverage) or linked with other payments (e.g., credit card bills), lowering the chance of missing a payment. Most employer group plans are term insurance, but if you leave that employer your state may require that you be allowed to convert the policy to a form of whole life insurance with the same insurance company that provides the group life insurance. You would then pay premiums directly to the company and keep the insurance in force. This can be an advantage if you are older, or have experienced deteriorating health, as it gives you the opportunity to qualify for whole life insurance without having a medical exam.


Requirements for a Group: T be considered fro insurance, a group must meet certain criteria which allow the actuary to predict with reasonable accuracy what its mortality experience will be. The three most important such requirements are:


 The group must have been formed for a purpose other than to obtain insurance. As mentioned above, the most commonly insured group is one made up of employees of a common employer.  A large percentage of the persons in the group will be included in the insurance plan. This rule ensures that a sufficiently large number of healthy persons are included to offset the unhealthy ones (who would almost certainly want to participate). The laws of many states require that any group insured must have a minimum participation of 75 percent of the members.  No individual in the group will be able to select how much insurance he or she personally will have. Many states have laws which set forth the maximum amount of group life insurance which may be issued on one person, as well as restrictions on the relative amounts that may be issued to different persons in the same group. Typically, a group will have a schedule which sets down the allowable amount of insurance within the group (usually pegged to wages or salaries received. For example:


Employee Annual Salary Amount of Life Insurance Under $10,000 $20,000 $10,000-$20,000 $40,000 $20,000-$40,000 $60,000 $40,000 to over $80,000


Schedule may be setup which is based on criteria other than salary. For example: The amount of insurance is sometimes based on a job classification, such as officer, manager, supervisor, and clerk


Paying For Coverage: The person (or corporation) to whom the policy issued normally pays the premium to the insurance company as they come due. However, the policy owner may actually collect part or all of this money from the insured members of the group before sending it to the insurance company. Three different arrangements are possible in this regard:


 Noncontributory__ where the members of the group pay nothing themselves, and the policy owner (often the employer of the members) 100% of the premiums.  Contributory__ where the members of the group share the cost with the policy owner. For example: Monthly Contribution per $1000 of Insurance On the first $20,000…………………………….None On the remaining amount (in excess of$20,000)……. $0.60per$1000 Total ………………………………………………….$12  Fully Contributory__ where the members of the group pay the entire cost.


The Group Actuary’s Responsibility: In life insurance companies which sell large amount of group insurance, there is generally a separate division of the actuarial department which is devoted entirely to group work. There may even be a separate department, called the Group Actuarial Department. These Actuaries regularly conduct studies to determine the actuarial mortality experienced and the amount of expenses incurred on its group insurance operations.



Types of Group Life Insurance: The most common type of group life insurance arrangements are; 1. One Year Renewable Term 2. Group Permanent 3. Group Life With Paid up Insurance


One Year Renewable Term Life Insurance Policy: This term life insurance policy is sometimes called a yearly renewable term or an annual renewable term life insurance policy. This term life insurance policy is one of the most widely purchased and offered life insurance coverage plans out there.


Based upon the name, the term life insurance policy lasts one year, however it can be renewed. A good thing about this term life insurance is that after the term life insurance policy expires, if the insured (or policy owner) decides to renew the term life insurance policy, the insured does not have to re-qualify. This is considered a renewal of the term life insurance policy "without evidence of insurability."


The term life insurance policy will state how many times it can be renewed, or up to which age it can be renewed till. Therefore, there is always an option to extend the term life insurance coverage regardless of a health background or hazardous occupation.


The death benefit on a one year renewable term insurance policy stays the same during the one year duration. Also, the death benefit stays the same even after the term life insurance policy is renewed. However, the premium increases each time the term life insurance policy is renewed, and the increase is more and more as the term life insurance coverage is continued. The reason for this is because as the term life insurance policy is extended, the age of the insured goes up, and ultimately, death rates increase with advancing age.


There is no savings component (no cash value) to this term life insurance policy. The amount of protection in this term life insurance policy is equal to the death benefit. Some of these term life insurance policies are non-participating and some are participating. You should decide which you prefer and make sure you ask the term life insurance agent whether the term life insurance policy is participating or not.


GROUP PERMANENT: Some group life insurances is issued on an other than term arrangement. This includes ordinary life, 20 payment life, whole life paid up at 65,etc.The gross annual premium charged for such coverage is level, just as in the case of an individual policy issued on such a basis. Also, group payment insurance provide nonforfeiture values on termination, as individual policies do. normally, group permanent is offered to members of a group as being available to replace part or all of their regular one-year term group insurance. Thus any participant can elect to have part of his or her group insurance. Continue in force as one-year term and part as group permanent. The total death benefit would be the same as before such an election. The principal reason for purchasing group permanent life insurance is to provide for some type of benefit to continue after the member leaves the group(most commonly at retirement). Such a benefit can either in the form of insurance coverage or else in the form of income provided by applying the cash value under the settlement options.


GROUP LIFE WITH PAID-UP INSURANCE: Under this arrangement, the total death benefits up of regular one-year term insurance plus paid up whole life insurance. A part of the premium (as chosen by each insured individual in the group) is used each year to buy the paid up whole life insurance , the amount of which is calculated in a manner similar to the purchases of paid up additions each year from dividend on an individual life policy. The total amount of paid insurance in force at any time represent a part of the total death benefits .The remainder (so that the combination equal the amount shown in the schedule) is provided by the regular one-year term group insurance arrangement.


PREMIUMS FOR GROUP LIFE INSURANCE :


The process of calculating gross premium for group life insurance is usually called rate making.


PREMIUM RATING CLASSES


In calculating premiums for any group, the actuary may choose from three possible approaches in determining what expected mortality to use. premiums resulting from each of these approaches are said to fall into one of three rating classes:


1- MANUALLY RATED.


These premium rates are developed independently of the mortality experiences of any particular group and are really based on the experiences of an average group.Such rates could theoretically be used for every group to insured .In practise,however,this is undesirable because some groups will have distinctly above average or bolow average mortality.


2- EXPERIENCE RATED.


These premium rates are developed by using the actual mortality experience only of the particular group (usually a large one) which will pay the rates. Such premiums will be prepared only if the groups mortality experience is significantly better or worse than average and only if actual experiences is likely to be the best basis for predicting the groups mortality in future.


3- BLENDED.


These premium rates are developed by basing mortality figures partly on manual and partly on experience rated data. If the actuary believes the groups actual mortality experience is soundly based and reliable, then a fairly large proportion of each premium rate will be derived from the experience rated approaches and vice versa. The proportion of the blend representing the experience rated approaches is called the CREDIBILITY PERCENTAGE OR CREDIBILITY FACTOR.


TO ILLUSTRATE- The actuary has calculated the following gross annual one-year term group premiums per $1000 for females age 40:

 Manually Rated ........................................................$2.72 Experience Rated for this particular group..................... 2.05 

If the actuary assigns a credibility percentage of 75% to this group, what blended rate will actually be charged for females age 40?


SOLUTION- Seventy- five percentage of the premium rate will be determined from the experience rated approach therefore the blended premium rated is calculated as follows:


Blended Premium Rate = .75 (Experience Rate) + .25 (Manual Rate)

 = .75 ($2.05) + .25 ($2.72) = $1.54 + $.68 =$2.22 

CALCULATION OF PREMIUMS. In calculating experience rated premiums, the mortality experience of that one particular group is the basis for that groups net premiums. The actuary must decide on the particular periods of time to be studied years such as the most recent 12 months. Frequently a period of several years is studied, since mortality experience is likely to fluctuate somewhat from year to year. Whatever the period used, the results may also be adjusted for changes expected in the near future. For MANUALLY RATED PREMIUMS, the mortality assumptions used generally those rates actually experienced by the insurance company on all those groups that would expected to have normal mortality. Sometimes these mortality rates are adjusted to reflect changes expected in the near future.net premium rates are generally calculated separately for each age and sex. manually rated net premiums may also be calculated separately for different types of industries. for example, group that consist entirely of police would generally have higher premium rates than group that consisting of clerical workers in an office. In order to add a margin for possible higher than anticipated death claims, it is also customary to increase the mortality rates before they are used to calculated net premiums. The interest rate used in calculating net premium is not important in one year term policies. The companies generally use a currently earned interest rate, although some companies ignore the interest factor in making the calculation. LOADING is added to the net premium rates in order to produces the gross premium rates. The loading for the insurance company s expenses profit and unforeseen contingencies, as well as the conversion privileged include in the group policy as explained below .A part of the premium is often refunded to the policy convert if it provides to be too large .


Gross= Net + Constant + Percent of Gross


To Illustrate - Calculate the gross annual premium rate per $1,000 to be charged for group coverage for males age 55, if the net premium rate per $1,000 has the following loading factors to be added in order to produce the gross rate:


For expenses, contingencies, and profit......$.55 For conversion privilege ..................... .40 For commissions and taxes ................... .25% of gross .. premium


Assume that the net premium rate per 41000 is $6.40. Solution__ Basic Equation: Gross = Net + Constant + % of Gross Solving the Equation for the Gross Gross-(0.25) (Gross) = $6.40 + $5.5 + $0.40 Gross-(1 - 0.25) = $7.35 Gross-(0.75) = $7.35 Gross = $9.80



Calculation of Monthly Payments: Group Life insurance premiums are most often paid monthly. At each yearly anniversary of a particular group policy, a listing is prepared of the total amount of insurance in force fro that group for each age & sex.


Sex & Age Insurance in Force Monthly Premium per $100 Total Monthly Premium Male,25 $100000 $0.13 $1300 Female,25 200000 0.08 1600 Male,35 400000 0.20 8000 Female,35 300000 0.13 3900 Male,45 1000000 0.55 55000 Female,45 1500000 0.39 58500 Total $128300


To derive the average monthly premium per$1000, the $1283 (total monthly premium) is divided by 3,500 (number of thousands of insurance in force): $1,283/3,500 = $0.37


If the total insurance in force the following months were found to be $3,850,000, the next payment would be calculated as follows (using the same average rate): $0.37 x 3,850 = $1,424.50



Reserves for group life insurance:


Un earned premium reserve: when group life insurance is issued on the one-year term basis the reserve liability which the insurance company must stability each december31 of the annual statement is equal to the portion of the last premium paid which is not yet used up. This is known as unearned premium reserve


Just as with individual insurance, it is the net premium which is considered inn calculating reserves. The net premium must be calculated from mortality tables.which are prescribed or issued by the state of authorities.. however it should be noted that some companies choose to follow the more conservative approach of suing gross premiums instead of net premiums when calculating reserves on the one-year renewable term type of policy.


Group permanent Reserves:. In the case of group permanent or group ordinary insurance. The method of calculating reserves is identical with that for individual insurance.


Conversion privilege Reserves:. An additional reserve is usually calculated for the individual policies which are issued from the exercise of the conversion privilege in group insurance (aver and above the regular required reserve on the individual policy). This is done because death rates on such policies are generally very high and the present value of future benefits in the reserve calculation is quite inadequate when a standard mortality table is used.


Contingency reserves: in selling group insurance, a company is faced with possibility of catastrophic death claims, a contingency not generally found in the case of individual insurance. This result from the fact that many of the members of an insured group may be closed concentrated, especially employees who work in the building. Therefore such possible disaster as earthquake, fires, fluids, explosions or epidemic could cause death claims for in excess of dose predicted in the premium calculations.


To afford protection against the effort of such possible disaster, it is customary for insurance companies to set aside money into a contingency reserve is voluntary and not legally required.


The contingency reserve thus represents money which is available to the insurance company to help pay catastrophic death claims, should they occur.


Investment policies

With-profits policies

Main article: With-profits policy

Some policies allow the policyholder to participate in the profits of the insurance company these are with-profits policies. Other policies have no rights to participate in the profits of the company, these are non-profit policies. A with-profits policy (Commonwealth) or participating policy (USA) is an insurance contract that participates in the profits of a life insurance company. ... A with-profits policy (Commonwealth) or participating policy (USA) is an insurance contract that participates in the profits of a life insurance company. ...


With-profits policies are used as a form of collective investment to achieve capital growth. Other policies offer a guaranteed return not dependent on the company's underlying investment performance; these are often referred to as without-profit policies which may be construed as a misnomer. A collective investment scheme is a way of investing money with other people to participate in a wider range of investments than may be feasable for a individual investor and to share the costs of doing so. ...


Insurance/Investment Bonds

Main article: Insurance bond

An insurance bond (or investment bond) is a single premium life assurance policy for the purposes of investment. ...

Pensions

Pensions are a form of life assurance. However, whilst basic life assurance, permanent health insurance and non-pensions annuity business includes an amount of mortality or morbidity risk for the insurer, for pensions there is a longevity risk.


A pension fund will be built up throughout a person's working life. When the person retires, the pension will become in payment, and at some stage the pensioner will buy an annuity contract, which will guarantee a certain pay-out each month until death.


Annuities

An annuity is a contract with an insurance company whereby the purchaser pays an initial premium or premiums into a tax-deferred account, which pays out a sum at pre-determined intervals. There are two periods: the accumulation (when payments are paid into the account) and the annuitization (when the insurance company pays out). For example, a policy holder may pay £10,000, and in return receive £150 each month until he dies; or £1,000 for each of 14 years or death benefits if he dies before the full term of the annuity has elapsed. Tax penalties and insurance company surrender charges may apply to premature withdrawals (if indeed these are allowed; in most markets outside the U.S. the policy owner has no right to end the contract prematurely).


Tax and life insurance

Taxation of life insurance in the United States

Premiums paid by the policy owner are normally not deductible for federal and state income tax purposes. Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        An income tax is a tax levied on the financial income...


Proceeds paid by the insurer upon death of the insured are not includible in taxable income for federal and state income tax purposes; however, if the proceeds are included in the "estate" of the deceased, it is likely they will be subject to federal and state estate and inheritance tax. Estate tax is a form of tax imposed in the United States upon the transfer of the property of the estate of a deceased person that is left to a living person or organization. ...


Cash value increases within the policy are not subject to income taxes unless certain events occur. For this reason, insurance policies can be a legal and legitimate tax shelter wherein savings can increase without taxation until the owner withdraws the money from the policy. On flexible-premium policies, large deposits of premium could cause the contract to be considered a "Modified Endowment Contract" by the IRS, which negates many of the tax advantages associated with life insurance. The insurance company, in most cases, will inform the policy owner of this danger before applying their premium.


Tax deferred benefit from a life insurance policy may be offset by its low return or high cost in some cases. This depends upon the insuring company, type of policy and other variables (mortality, market return, etc.). Also, other income tax saving vehicles (i.e. IRA, 401K or Roth IRA) appear to be better alternatives for value accumulation, at least for more sophisticated investors who can keep track of multiple financial vehicles. The combination of low-cost term life insurance and higher return tax-efficient retirement accounts can achieve better performance, assuming that the insurance itself is only needed for a limited amount of time.


The tax ramifications of life insurance are complex. The policy owner would be well advised to carefully consider them. As always, Congress or the state legislatures can change the tax laws at any time.


Taxation of life assurance in the United Kingdom

Premiums are not usually allowable against income tax or corporation tax, however qualifying policies issued prior to 14 March 1984 do still attract LAPR (Life Assurance Premium Relief) at 15% (with the net premium being collected from the policyholder). Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        An income tax is a tax levied on the financial income... Jim Callaghan, the Chancellor of the Exchequer who introduced corporation tax in 1965. ...


Non-investment life policies do not normally attract either income tax or capital gains tax on claim. If the policy has as investment element such as an endowment policy, whole of life policy or an investment bond then the tax treatment is determined by the qualifying status of the policy.


Qualifying status is determined at the outset of the policy if the contract meets certain criteria. Essentially, long term contracts (10 years plus) tend to be qualifying policies and the proceeds are free from income tax and capital gains tax. Single premium contracts and those run for a short term are subject to income tax depending upon your marginal rate in the year you make a gain. All (UK) insurers pay a special rate of corporation tax on the profits from their life book; this is deemed as meeting the lower rate (20% in 2005-06) liability for policyholders. Therefore if you are a higher rate taxpayer (40% in 2005-06), or become one through the transaction, you must pay tax on the gain at the difference between the higher and the lower rate. This gain may be reduced by applying a complicated calculation called top-slicing based on the number of years you have held the policy.


Although this is complicated, the taxation of life assurance based investment contracts may be beneficial compared to alternative equity based collective investment schemes (unit trusts, investment trusts and OEICs). One feature which especially favors investment bonds is the ability to draw 5% of the original investment amount each policy year without being subject to any taxation on the amount withdrawn. The withdrawal is deemed by HMRC (Her Majesty's Revenue and Customs) to be a payment of capital and therefore the tax calculation is deferred until further encashment above the 5% limit. This is an especially useful tax planning tool for higher rate taxpayers who expect to become basic rate taxpayers at some predictable point in the future (e.g. retirement).


The proceeds of a life policy will be included in the estate for inheritance tax (IHT) purposes. Policies written in trust may fall outside the estate for IHT purposes but it's not always that simple. If in doubt you should seek profession advice from an IFA (Independent Financial Adviser) who is registered with the government regulator: the Financial Services Authority. The Financial Services Authority (FSA) is an independent non-departmental public body and quasi-judicial body that regulates the financial services industry in the United Kingdom. ...


Pension Term Assurance

Although available before April 2006, from this date pension term assurance became widely available in the UK. Most UK product providers adopted the name "life insurance with tax relief" for the product. Pension term assurance is effectively normal term life assurance with tax relief on the premiums. All premiums are paid net of basic rate tax at 22%, and higher rate tax payers can gain an extra 18% tax relief via their tax return. Although not suitable for all, PTA briefly became one of the most common forms of life assurance sold in the UK until the Chancellor, Gordon Brown, announced the withdrawal of the scheme in his pre-budget announcement on 6 December 2006. The tax relief ceased to be available to new policies transacted after 6 December 2006, however, existing policies have been allowed to continue to enjoy tax relief so far. Pension Term Assurance (PTA) is a form of life insurance available within the U.K. Although PTA has been avaiable for several years, it only became mainstream when changes were made to pension legislation on A Day, 6th April, 2006. ... Pension Term Assurance (PTA) is a form of life insurance available within the U.K. Although PTA has been avaiable for several years, it only became mainstream when changes were made to pension legislation on A Day, 6th April, 2006. ...


History

Insurance began as a way of reducing the risk of traders, as early as 5000 BC in China and 4500 BC in Babylon. Life insurance dates only to ancient Rome; "burial clubs" covered the cost of members' funeral expenses and helped survivors monetarily. Modern life insurance started in late 17th century England, originally as insurance for traders: merchants, ship owners and underwriters met to discuss deals at Lloyd's Coffee House, predecessor to the famous Lloyd's of London. For other uses, see Babylon (disambiguation). ... For other uses, see England (disambiguation). ... It has been suggested that Council of Lloyds be merged into this article or section. ...


The first insurance company in the United States was formed in Charleston, South Carolina in 1732, but it provided only fire insurance. The sale of life insurance in the U.S. began the late 1760s. The Presbyterian Synods in Philadelphia and New York created the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759; Episcopalian priests organized a similar fund in 1769. Between 1787 and 1837 more than two dozen life insurance companies were started, but fewer than half a dozen survived. Nickname: Motto: Aedes Mores Juraque Curat (She cares for her temples, customs, and rights) Location of Charleston in South Carolina. ... Presbyterianism is part of the Reformed churches family of denominations of Christian Protestantism based on the teachings of John Calvin which traces its institutional roots to the Scottish Reformation, especially as led by John Knox. ... For other uses, see Philadelphia (disambiguation) and Philly. ... This article is about the state. ... This article is about the Episcopal Church in the United States. ...


Prior to the American Civil War, many insurance companies in the United States insured the lives of slaves for their owners. In response to bills passed in California in 2001 and in Illinois in 2003, the companies have been required to search their records for such policies. New York Life for example reported that Nautilus sold 485 slaveholder life insurance policies during a two-year period in the 1840s; they added that their trustees voted to end the sale of such policies 15 years before the Emancipation Proclamation. Combatants United States of America (Union) Confederate States of America (Confederacy) Commanders Abraham Lincoln, Ulysses S. Grant Jefferson Davis, Robert E. Lee Strength 2,200,000 1,064,000 Casualties 110,000 killed in action, 360,000 total dead, 275,200 wounded 93,000 killed in action, 258,000 total... The Buxton Memorial Fountain, celebrating the emancipation of slaves in the British Empire in 1834, London. ... This article is about the U.S. state. ... Official language(s) English[1] Capital Springfield Largest city Chicago Largest metro area Chicago Metropolitan Area Area  Ranked 25th  - Total 57,918 sq mi (140,998 km²)  - Width 210 miles (340 km)  - Length 390 miles (629 km)  - % water 4. ... The New York Life Insurance Company (NYLIC) is the largest mutual life-insurance company in the United States, and one of the largest life insurers in the world. ... Wikisource has original text related to this article: Emancipation Proclamation Reproduction of the Emancipation Proclamation at the National Underground Railroad Freedom Center in Cincinnati, Ohio The Emancipation Proclamation consists of two documents issued by United States President Abraham Lincoln during the American Civil War. ...


Market trends

Life insurance premiums written in 2005
Life insurance premiums written in 2005

According to a study by Swiss Re, EU was the largest market for life insurance premiums written in 2005 followed by the USA and Japan. Image File history File links Size of this preview: 800 × 351 pixelsFull resolution (1425 × 625 pixel, file size: 60 KB, MIME type: image/png)This bubble map shows the global distribution of life insurance premia written in 2005 as a percentage of the top producer (USA - $517,074,000,000). ... Image File history File links Size of this preview: 800 × 351 pixelsFull resolution (1425 × 625 pixel, file size: 60 KB, MIME type: image/png)This bubble map shows the global distribution of life insurance premia written in 2005 as a percentage of the top producer (USA - $517,074,000,000). ... 30 St Mary Axe - at 180 m, Swiss Res London headquarters is the 6th tallest building in London Swiss Re is the worlds second-largest reinsurance company (after Munich Re/ Münchener Rück), and the worlds largest life and health reinsurer. ...


Criticism

Although some aspects of the application process (such as underwriting and insurable interest provisions) make it difficult, life insurance policies have been used in cases of exploitation and fraud. In the case of life insurance, there is a motivation to purchase a life insurance policy, particularly if the face value is substantial, and then kill the insured.


The television series Forensic Files has included episodes that feature this scenario. There was also a documented case in 2006, where two elderly women are accused of taking in homeless men and assisting them. As part of their assistance, they took out life insurance on the men. After the contestability period ended on the policies (most life contracts have a standard contestability period of two years), the women are alleged to have had the men killed via hit-and-run car crashes. [9] A television program is the content of television broadcasting. ... Current Forensic Files title card Forensic Files is a documentary style show which reveals how forensics and science are used to solve violent crimes, mysterious accidents, and even outbreaks of illness. ...


Recently, viatical settlements have thrown the life insurance industry into turmoil. A viatical settlement involves the purchase of a life insurance policy from an elderly or terminally ill policy holder. The policy holder sells the policy (including the right to name the beneficiary) to a purchaser for a price discounted from the policy value. The seller has cash in hand, and the purchaser will realize a profit when the seller dies and the proceeds are delivered to the purchaser. In the meantime, the purchaser continues to pay the premiums. Although both parties have reached an agreeable settlement, insurers are troubled by this trend. Insurers calculate their rates with the assumption that a certain portion of policy holders will seek to redeem the cash value of their insurance policies before death. They also expect that a certain portion will stop paying premiums and forfeit their policies. However, viatical settlements ensure that such policies will with absolute certainty be paid out. Some purchasers, in order to take advantage of the potentially large profits, have even actively sought to collude with uninsured elderly and terminally ill patients, and created policies that would have not otherwise been purchased. Likewise, these policies are guaranteed losses from the insurers' perspective. Thus, insurers will need to raise rates in order to protect


See also

Critical illness insurance or critical illness cover is a contract, invented by Dr Marius Barnard[1], where an insurer makes a lump sum cash payment if the policyholder is diagnosed with one of the critical illnesses listed on the insurance policy and survives a minimum number of days (the survival... Term life insurance is the original form of life insurance and is considered to be pure insurance protection because it builds no cash value. ... The examples and perspective in this article or section may not represent a worldwide view. ... Whole life insurance, or Whole of Life Assurance, refers to a policy that pays a lump sum on death or, in some cases, the earlier diagnosis of a critical illness whenever it occurs provided the contract is kept in force through the required payments being made. ... Universal Life (UL) is a type of permanent life insurance based on a cash value. ... It has been suggested that Variable universal life Insurance be merged into this article or section. ... Corporate-owned life insurance (COLI) is life insurance on employees lives but owned by the corporation. ... Servicemembers Group Life Insurance, or SGLI, is a heavily subsidized life insurance product available to active members of the United States Armed Forces, including ready reservists, commissioned members of NOAA and the Public Health Service, cadets and midshipmen in one of the four service academies, and members of the Reserve... Segregated Funds are a classification of funds administered by an insurance company in the form of individual, variable life insurance contracts offering certain guarantees to the policyholder such as reimbursement of capital upon death. ... Annuity contracts are offered by organizations and individuals that may accumulate value and take a current value and pay it out over a period of years. ... The life annuity (also known as a single-payment annuity) is a financial instrument that allows for a seller (issuer), typically a financial institution such as a life insurance company, to provide a series of future payments to a buyer (annuitant) for a known sum with a net present value... Independent Financial Advisers or IFAs are professionals who offer unbiased advice on financial matters to their clients and recommend suitable financial products from the whole of the market. ... Estate planning is the process of accumulating and disposing of an estate to maximize the goals of the estate owner. ... A retirement plan is an arrangement to provide people with an income, or pension, during retirement, when they are no longer earning a steady income from employment. ... Insurance fraud or false insurance claims are insurance claims filed with the intent to defraud an insurance provider. ... Underwriting refers to the process that a large financial service provider (bank, insurer, investment house) uses to assess the eligibility of a customer to receive their products like equity capital, insurance or credit to a customer. ... Medical underwriting is an insurance term referring to the use of medical or health status information in the evaluation of an applicant for coverage (typically for life or health insurance). ... This article is about the measure of remaining life. ... Capital has a number of related meanings in economics, finance and accounting. ... General insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. ... Pet Insurance pays the veterinary costs if ones pet is ill or is injured in an accident. ...

References

  1. Life Insurance. MIB web page. MIN Inc (2007-02-08). Retrieved on 2007-04-06.
  2. Life Insurance. Life Direct web page - Life Insurance with Tax Relief. Life Direct (2007-11-29). Retrieved on 2007-11-29.

Year 2007 (MMVII) is the current year, a common year starting on Monday of the Gregorian calendar and the AD/CE era in the 21st century. ... is the 39th day of the year in the Gregorian calendar. ... Year 2007 (MMVII) is the current year, a common year starting on Monday of the Gregorian calendar and the AD/CE era in the 21st century. ... is the 96th day of the year (97th in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) is the current year, a common year starting on Monday of the Gregorian calendar and the AD/CE era in the 21st century. ... is the 333rd day of the year (334th in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) is the current year, a common year starting on Monday of the Gregorian calendar and the AD/CE era in the 21st century. ... is the 333rd day of the year (334th in leap years) in the Gregorian calendar. ...

External links

  • Chart Comparing Different Types of Life Insurance
  • Learn About Life Insurance - Insurance Information Institute Life Insurance Learning Center
  • The Life and Health Insurance Foundation for Education
  • A History of Life Insurance in the United States through World War I
  • Illinois Department of Financial & Professional Regulation, Division of Insurance, Slavery Era Policies Report August 2004
  • Code of Ethics, National Association of Insurance and Financial Advisors

  Results from FactBites:
 
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The main purpose of purchasing life insurance is to ensure that your dependents are financially protected in the event of death.
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