Life insurance is a unique financial product designed to provide a pre-determined sum of money at the exact moment it is needed most. In some point of view, it is an oxymoron and completely unpredictable that deals scientifically and precisely with variables that are emotional and, within the context of our own individual lives In return, the policy owner agrees to pay significantly smaller sums over a period of time.

So we all need insurance. We all need to pay those premiums just in case something unpredictable. As we all know Life involves risk. And exactly the insurance is based on risk. To calculate that risk, the insurance companies have surveyed the statistical picture and come up with a plan that’ll give you peace of mind. All insurance policies, is a legal contract specifying the terms and conditions of the risk assumed.

There are three entities in a life insurance transaction: the insurer, the insured, and the owner of the policy, although the owner and the insured are often the same person. The insured involves with the transaction to pay a small amount of premium for a fixed number of years. Then the insured is awarded the sum insured with bonuses. If the insured dies during the policy period then the insurer provides the sum insured to the beneficiary chosen by the insured.

In fact all the insurance policies are legal agreement. There are some clauses or rules to protect the insurer. For example, if the insured commits suicide within two years of taking the policy or if the facts of insured are found to be wrong then the insurer can declare the policy null and void. But the insurer has a legal right to contest the claim if the insured dies within two years of taking the policy also.

There is so called the face amount appears when the amount paid at the maturity of the policy. Usually insurance policies protect the financial interests of the owner of the policy when the insured dies at any time. According to the law the policy owner should have a legitimate reason to insure the life of another person since the demise of the insured is beneficial for the policy owner.

Generally the policies are valued with administrative expenses and to make some profit in such a way that they can easily to be paid. Professionals called ‘actuaries’ determine the mortality tables, considering the age; gender, health and habits of the insured. Along with these the health and family history of the individual also plays a vital role in determining the mortality table. These morality table set up the guideline premiums.

The insurance companies are always eyeing at the premiums as the main source of income for them. Many companies invest these in profitable activities to meet the company’s expenditure. Even the insurance companies also don’t want to pay huge amounts unnecessarily until investigating each policy thoroughly.

The investigation is called underwriting. This investigate includes inquiring into health and life style issues. If it is not satisfied with the individual’s state of health or style of living they have a right to reject a policy request. In some cases the risk potential is higher then the companies have the authority to hike premiums.

There are four types of insurance seekers according to the insurance companies categorize such as Preferred Best, Preferred, Standard and Tobacco. The Preferred Best policy holders are those who are young and in the best of health. Even profession, travel and lifestyle also determine to a person while buying a policy.

The company also asks for a proof of death certificate to settle the claims if the insured person dies. The mode of payment is decided by the policy holder in a single transaction or in recurring payments.