How Life Insurance Works

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The original purpose of life insurance is to guarantee the payment of a sum of money (capital or annuity) linked to an event concerning the insured’s death or survival. And provides capital or an annuity for a life term of the contract.

In some places life insurance is a double insurance and death insurance in case of life on a single period. This can present a virtual savings product, with tax benefits of insurance.

Life insurance also allows funds to grow while continuing a long-term goal: retirement, investment, etc. Offering significant tax benefits in respect of succession. A life insurance contract must have a fixed term subscription, renewable or not according to contract extension annually.

The benefits for the policyholder is derived from the peace of mind, rather than the claim event, due to the contradictory financial effects induced by death.

The subscriber is the one committed to the insurer for payment of the premium and the signing of the insurance policy, he has the right to select the beneficiaries of the annuity or capital in case of death of the insured. The insured is the person covered in respect of the risk (death), and has to complete the medical questionnaire as required.

The beneficiary: in case of death the beneficiary is one who has been designated to receive proceeds of the insurance by the subscriber. He can be appointed directly or indirectly, (Note that in this case the recipient will sign a contract, and the purchaser can unilaterally make any withdrawal or change to the beneficiary clause without). Moreover a clause out of the contract is also valid (on a will or filed with the undersigned). The recipient may be both the insured and subscriber,

Most contracts offered on the market are known as collective: the insured is represented to the insurer by a combination of insureds. Any change in the contract is then negotiated between the insurer and the association. In contrast, individual contracts are concluded directly between the insurer and underwriter, and any change of contract can therefore be made without the prior consent of the subscriber.

Although an individual contract is not safe for the subscriber, it also increases the risk that the insurer waives its contract to upgrade regularly (adding new services, lower some charges, etc).

The costs that are usually found in a life insurance contract are often expressed as a percentage of the amounts invested and may be entrance fees or business expenses, paid only once at the time of payment. Management fees, paid annually on the account and costs of arbitration paid in case of change of investment vehicles in a contract.

In addition to management fees in the life insurance contract, the customer is also liable for costs of managing investment funds chosen in the contract (and also the transaction costs of these funds).

 

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