Life Insurance Companies


 Life Insurance Companies

Life Insurance Companies

What is life insurance?
A life insurance plan is a contract between an individual and an insurer. The company agrees to pay the policyholder (the insured) a certain sum of money at the insured person's death, either to their family or to the beneficiary. A person may buy multiple policies over their lifetime, for themselves and/or other people. Policies typically pay out a lump sum or periodic payments of cash value, depending on the type of plan. The most common types of life insurance policies are term (a definite term, usually 10 years) and permanent (a guaranteed payout for life). A policy may also be called an insurance policy or a contract of insurance.

Life insurance is required in many countries to obtain a license to practice law. Additionally, several countries require that all citizens have some form of life insurance, as do some states in the United States and Canada, such as Michigan. Life companies pay out certain amounts of money in case of death at regular intervals. For instance if someone dies after paying off a portion of the premium amounts instead if the full amount within a specified period as defined by the terms and conditions of each manager or branch. Most often used to aid parents in the education of their children. Life insurance is also important for the well-being of society, as many people will have financial needs in retirement which they may not be able to afford.

Life insurance industry
There are two types of life insurance companies: those that insure living persons, and those that insure already dead persons. The former group is called "residual-life companies", since they only pay out on death and do not cover any premium payments made by living policyholders over their lifetime. The latter group are "ordinary life insurers", because their business is mainly to insure people who are alive. 

Life insurance companies offer various kinds of policies. Term insurance, for example, covers a policyholder for a definite period of time, such as 10 or 20 years; it is intended to provide protection against premature death (e.g. accidental death). On the other hand, permanent life insurance pays out small amounts at regular intervals over the insured's lifetime as long as premiums are paid consistently.

A common misperception among Americans is that in order to purchase life insurance, you must be wealthy or have considerable savings. This has been shown to be false when analyzing statistics from the National Association of Insurance Commissioners (NAIC). In 2009, only 3.7% of domestic life insurance policies were purchased by individuals with a net worth exceeding $5,000,000. Insurance companies do not view the amount of money an individual has saved as an indicator of an individual's ability to pay for a life insurance premium.

The main reason people buy life insurance is to ensure that their families will be financially provided for upon death and will not have to rely on state assistance (such as Social Security) or prior debt such as credit cards or mortgages. As the death rate is much higher for men than it is for women, insurers tend to calculate rates based on statistics showing males die younger than females. Insurance companies calculate rates based on a variety of factors which may include individual risk profile, marital status, occupation, and health. The typical life insurance premium is 20% of the insured's annual income or other life insurance plans.

Some people who have purchased life insurance are experiencing problems with the insurance policy because they think they have paid too much in premiums which has resulted in less benefit than they expected so that they do not receive enough money to compensate for their expenditures when their lives end. In order for this to happen, the premium for a certain amount that is paid by an individual must be small enough so that it does not affect his financial ability to pay any claims he might make on his life insurance policy at any point during his lifetime.

Mutual insurance companies are required to provide members with an annual statement of the value of their policy, commonly called a "policy owner's report" or "policy statement". In life insurance, the policy owner is the person(s) whose life is insured by the company. The policy owner's report shows information about all benefits that have been paid for up to one year. This sort of reporting requirement has been mandated in many jurisdictions as part of legislation enacted by the legislature.

Life insurance companies also maintain reserves to ensure they can pay future claims without raising costs for their customers. The amount and type of reserve is required to be calculated and justified by each insurer at a minimum rate equal to prescribed statutory minimums.

The life insurance industry has been criticized for providing incentives to sell high-risk or "junk" policies, with riskier clients spending more money on these products than low-risk clients would. The savings from not having to pay higher premiums are outweighed by the potential costs of buyer death and the costs associated with paying claims on policies which typically have a higher mortality rate. Life insurance companies generally do not make it clear that these policies are being sold; instead they package these high-risk plans for sale as "term insurance" or "variable universal life insurance". Insurance companies also have been criticized for failing to provide information about their products' risks to customers, and providing inaccurate information regarding their own products' risks.

In the 1970s, state insurance departments across the United States began an investigation into the practices of life insurers. The intent was to uncover fraudulent sales and marketing practices that had been disguised as legitimate "sales training." This investigation led to a law reform, which required standardized sales practices among insurers. The law reform also provided greater protection for consumers, including limitations on mortality charges and lapse fees.

The practice of life insurance goes back to the Ancient Egyptians, in which they used a document called "Surety" that guaranteed a loan repayment if the debtor died. It is believed that these documents were used in much the same way as modern life insurance policies are today.

Life insurance was first considered a form of investment, and as such, was often sold as an annuity. In the United Kingdom in 1760, a group of men established the "Society for Assuring Favourite Debtors" (SAFD). The SAFD started with six members and had 100 policies on two dozen life-insurance syndicates. The SAFD ended its operations in 1783 when the individual government guaranteed insurance companies could take over.

There are several reasons for developing life insurance in ancient times:

The amount of coverage is determined by a set of rules that generally include gender, age, occupation, property value and annual income. A life insurance policy is a contract between the purchaser and the company, which states that the policyholder is insured for a certain amount in exchange for periodic premiums. The policy also contains provisions that determine the type of death a person can have to qualify for benefit payments. For example, some policies only provide benefits if the death is accidental, while others pay out if death occurs due to an illness.

These rules are also designed to protect against fraud. Some life insurance policies contain clauses that pay out after a certain number of years regardless of whether or not the policyholder dies.


The world has changed. We are not afraid of dying as we used to be, and we are more selective of when and how we die. The Industrial Revolution, the medical revolution, and technology have led us to change our approach to life insurance. Individuals are guaranteed financial security by companies that will honor their policies after death. Our life insurance needs have changed over time just as much as the world we live in has changed. We can insure against any eventuality now; even a policy that pays out if you become bedridden for five years can be bought or sold on the market today.

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