Policyholders in Life Insurance

Policyholders in Life Insurance

Enrolling in an insurance is not an easy task. It takes a lot of understanding to get used to the terms involved in insurance. In any life Insurance, there is a policyholder, insurer, and a beneficiary. An insurer promises to pay the benefits in exchange for the premiums paid by the policyholder. A beneficiary is a person who will be given all the money for the insurance paid In case the policyholder dies.

The person who owns the policy is called the policyholder. Any adult or legal entity is eligible to become the policyholder. There should be mutual understanding between the insurer and the policyholder for any life Insurance.

There is a common type of policyholder and insurer scenarios such as husband as the policyholder of a wife. Parent as the child’s policyholder. Business-owning life insurance on key employee etc.

Paid Up Life Insurance

Life insurance generally lasts until the insurer’s lifetime. However, you can free yourself from all the obligations by paying the premiums for your insurance before you die and terminate the policy. These types of policies are paid up insurance policy.

Paid-up Life Insurance falls under the traditional insurance policy plans. The sum assured is the total paid-up value. It is calculated as the ratio of a total number of actual insurance paid to the number of insurance that is estimated to be paid considering policy and the sum assured at the maturity.

If the insurer does not opt to take out the matured money, then he or she gets an option to get a proportionate amount of bonus for the assured amount. Paid-up policies can be surrendered if the insurer wants to terminate the life Insurance.  If the policy is surrendered, then the surrendered value is deducted from the total amount based on the total tenure left for the policy to mature. The minimum guaranteed value in Life insurance is generally 30% of the premium if the insurer surrenders the policy within 2-3 years for a 10-year policy. If the insurer surrenders the policy after 6 years then the guaranteed value is 50% of the premium paid. However, there is a special surrender value, which is normally higher than the normal surrender value. The amount is higher because the insurance company counts bonuses in it.

Basic principles of Life Insurance

Every insurance runs on some of the basic principles. The life Insurance plans are only meant to compensate for the losses on the demise of the policyholders. The total amount is paid to the beneficiary in case of the death of the policyholder. The insurance runs on a few basic principles.

Insurable Interest: The principle says, if a person buys an insurance on the name of another insurer, the policy owner should have a genuine interest in the life of the person for whom he buys the insurance. Parents buying insurance for their children is a valid example of insurable interest. However, it is not allowed to buy insurance for your neighbor.

The principle of indemnity: It states that the total value of any life Insurance is not more than the financial value of the life insured. Mostly the amount of money you can get for your life insurance is directly proportional to your income and total tenure left for you to work.

Good Faith:  The world runs on the faith. So are the life insurances. When you sign up for any Insurance plan, there should be good faith between the insurer and the policy issuing insurance company. The company expects you to disclose all the information needed for a successful insurance plan. In case you fail to disclose any important information, the insurance provider may terminate your policy or you will not be awarded the sum assured at the time of claim of the policy.

Material facts disclosure:  It is always important to disclose all the required information especially information related to your income and the medical records. In the past, the insurance issuer was relying on the information provided by the insurer. However, with time there were a lot of fraud activities reported. Therefore, the insurance company is validating the information carefully before issuing any insurance to anyone.

Life Insurance and retirement go together always. Either you choose to pay more while you are working so that you no longer have to pay for the premiums after retirement or pay lesser premium initially and continue with the same premium payment until you are alive. It is always convenient to pay more initially and enjoy for the rest of your life.

Categories: Finance, Insurance

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