What is Life Insurance?

Posted by on Aug 5, 2009 in Learning Center | 0 comments

Life Insurance 101-What is it?

Life insurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money to the insured’s beneficiaries upon the occurrence of the insured individual’s death.

In return, the policy owner agrees to pay a stipulated amount called a premium at regular intervals or in lump sums.

The amount of premium to be paid to the insurer, the cost of insurance(COI), is calculated by figuring the insured’s age and health classification.

 The health classification is determined by a medical exam which tests for health conditions that would adversely affect the life expectancy of the insured.

The COI is based on mortality tables that estimate with a high degree of probability, the life expectancy of the insured. The older applicant with more medical impairments has a higher COI than the younger applicant with less medical impairments.

Did you like this? Share it:

Leave a Reply

Your email address will not be published. Required fields are marked *