Life insurance is a type of contract that is created between two parties; the insurer and the insurance holder. The agreement requires the insurance holder to pay some amount of money to the insurer over a period or at once, which should be compensated to designated persons after the policy holder’s death. It is commonly taken in old age or by people with chronic illness who are more prone to dying. Upon the death of these individuals, the beneficiaries legally get compensation from the insurance company of a certain amount of money depending on the premium paid by the late. The beneficiaries are likely to be family members such as spouses or children.
Limitations of the life insurance
These contracts are legalized by the law, especially in most Commonwealth countries. However, they also have some limitations upon which the insurer cannot compensate the beneficiary. During the signing of this contract, the insurance holder agrees that some types of deaths are not in the compensatory list such as; suicides, wars, riots and death sentences.
Types of life insurances
There are two main types of life insurances which have different terms and conditions. They include:
It is a permanent life insurance which is paid entirely either in large or small premiums. It is meant to serve as an investment to the beneficiaries and comes in handy during untimely deaths.
This was a standard legal policy in the past. It was meant to provide an assured compensation in some occurrences such as illnesses and old age.
Employees life insurance
Presently, most employers offer their employees with a life insurance cover as an additional benefit. In such situations, the employer must determine who should be offered such benefits and the best type of policy to opt for. “For instance, a group policy is more attractive as compared to an individual one due to lower rates” says Lynne Scheer from goldkeybenefits.com “It is also easier to offer such benefits to designated employees by considering factors such as; job group, marital status and length of service.” These benefits may be legally applicable in the case of accidents of employees in the course of duty. The beneficiaries listed by the employer receive their compensation in case of death. The beneficiary maybe one or more than one, however, all are compensated according to the contract. Life insurance for employees is a great idea for businesses looking to offer affordable benefits.
Benefits of life insurance
The benefits are treated more favourably without imposing tax incomes on them.
The amounts paid to the insurance company are flexible and can be increased or decreased any time depending on the amount of income.
The insurance legally ensures that beneficiaries lead a healthy life even after the death of their bread winners.
A life insurance cover served as both protection and savings which helps one satisfy their desires in life in their absence.
Disadvantages of life insurance
They are expensive- They require one to pay a premium for their entire lives until they die. It is considered as a basic requirement in the present day.
“Some of the insurance companies may illegally fail to compensate the beneficiaries by playing some tricks on them. It is thus important for one to read carefully through the policy before signing it.” Warns Gold Key Benefits. Some of the beneficiaries may misuse the compensatory funds given to them and use them contrary to the intended purpose.
Life insurance does not necessarily mean that one leaves a good life. The compensation is commensurate with the amount of money that was paid by the insured person.
Life insurance covers are good investments and saving plans for the life after death. However, they must be chosen carefully to ensure that they serve their intended use.