What is a Life Insurance Company?

2007-03-08 10:33:40

( Insurance )



A life insurance company gives individuals protection against a specified risk. The life insurance company takes a specified sum from each policy holder in order to accumulate funds adequate to make up for losses and expenses. The basic mechanism of insurance is the contract (the policy), which binds one party (the insurer) to protect another (the insured) against loss from a possible occurrence (the risk), in return for a certain consideration (the premium).

The probability of the occurrence of losses is accurately predictable, given a sufficiently large body of statistics. If an insurance company knows with a reasonable degree of precision how much it will have to pay in losses, it already has the most important item used in making up the rate to be charged for the insurance.

Term life insurance companies issue simplest kind of life insurance. In its most basic form, a policy term insures the life of an individual for one year. If he dies within that time, his beneficiary collects the face value of the policy. If he lives, the policy expires just as a fire policy does.

If a man buys a policy for one year and renews it every year, at each renewal date he has to pay a higher premiums at an age when his income producing capacity has popular except as a way of meeting special needs of short duration. It is nevertheless the basis for all other forms of life insurance.

There are a number of life insurance companies in the US that offer different types of marketing strategies in order for you to buy their policies. Some companies provide a customized life insurance policy based on the needs of your family. Others focus on employer-sponsored group policies.

Whichever life insurance company you choose from anywhere, be sure to check out the benefits each company has to offer in proportion to the monthly premium you pay.


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