Understanding Life Insurance

Article Written By: PetronaRedding

Life insurance is essential for anyone that has friends or family depending on them financially. It is seen as a kind of protection that will keep your dependants from financial ruin when you are no longer there to take care of them. If you were to die, your insurance policy will pay out a certain amount to the nominated beneficiaries to replace your monthly income. It is not as simple as it sounds; there are more to take into consideration.

For you to make the best decision when choosing a life insurance policy, it is important that you learn the terms, find out what the process is and what happens during it.

The owner of a policy is called the insured, the company they have a policy with is called the insurer and the money they need to pay into their policy every month is called a premium. If you were to receive the proceeds of someone's life policy, you will be called the nominated beneficiary and the amount you will receive from the insurer is called a face amount. The estimated amount of time an insured or policy holder has to live is known as the person's life expectancy. So, now that you can speak the language, let's talk.

A life insurance policy can be seen as a legal, binding contract that has terms and conditions that need to be adhered to. Although different insurance companies will have different terms and conditions, they all have specific standard industry clauses as well, such as the beneficiary clause. The clause states that only the policy holder can change, remove or add beneficiaries onto their policies, for obvious reasons of course. Nonetheless, all insurance companies have terms and conditions and it is important that you read and understand them before making a decision.

Insurance companies will always need to do some kind of evaluation to determine if you are a high-risk customer or not. The most common evaluation is the Heath evaluation: doctors will run various tests on you to determine your health status. The results will be sent back to the insurance company to evaluate. Some insurance companies may want more information on you, so they will also do a lifestyle, family history and health history evaluation.

I recently applied for a life insurance policy but was denied one. This was a shock for me as I am a very fit and healthy person, so I decided to make an appointment with my broker, and I asked him what the problem was. He said that the results they received on my family health history suggest that I am a high-risk customer and therefore was denied my policy. Other reasons to be denied a policy includes bad health or unhealthy lifestyle habits, age and if you have a dangerous career or have extreme hobbies and are put at risk more than the average person.

In the even of the insured's death, a death certificate usually has to be submitted to the insurer before the claim can be settled. Deaths that are found to be suspicious will be investigated, which can prolong the claim process. If the death was found to be a suicide, the insurance company will usually not pa the claim, depending on the terms and conditions of course. However, some companies do have a 2 year suicide exclusion period where if the insured commits suicide after the 2 year period, they are obliged to settle the claim.

Some insurance companies may also not settle when the insured was only covered for accidental death, but dies of non accidental causes. There are various reasons why insurance companies will not settle claims, that is why you need to always read the fine print and always watch out for loopholes in the contract. Ask questions if you are uncertain!

About the Author

For more information about life insurance, go to http://www.hollardlifeinsurance.co.za

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