Minggu, 01 September 2013

Information About The terms of the life insurance contract

The terms of the life insurance contract
Special exclusions may apply, such as suicide clauses, so that the policy becomes null and void if the insured commits suicide within a specified period (usually two years after the date of purchase, and some states provide a statutory provision suicide of one year). The misrepresentations by the insured on the application also can be grounds for annulment. Most U.S. states establishes a maximum period of con testability, often no more than two years. Only if the insured dies within this period will the insurer have a legal right to contest the claim on the basis of misrepresentation and request additional information before deciding to pay or deny the request.

 The face amount of the policy is the initial amount that the policy will pay for the death of the insured or when the policy matures, although the actual death benefit can provide higher or lower than the nominal value. The policy matures when the insured dies or reaches a specified age (such as 100 years old).

 Costs, insurability, and underwriting

 The insurer (the life insurance company) calculates the policy prices with intent to fund claims paid and administrative costs, and to make a profit. The cost of insurance is determined using mortality tables calculated by actuaries. Actuaries are professionals who employ actuarial science, which is based in mathematics (primarily probability and statistics). Mortality tables are statistically based tables showing expected annual mortality rates. It is possible to derive life expectancy estimates from these mortality assumptions. Such estimates can be important in taxation regulation.

 The three main variables in a mortality table are commonly age, sex, and the use of snuff, but more recently in the U.S., have been introduced preferred class specific tables. The mortality tables provide a baseline for the cost of insurance, but in practice, these mortality tables are used in conjunction with the health and family history of the person applying for a policy to determine premiums and insurability. Mortality tables currently in use by life insurance companies in the United States are individually modified by each company with experience in industry cluster studies as a starting point. In 1980 and 1990, the 1975-1980 SOA basic tables and final selection were common reference points, while the 2001 VBT and 2001 CSO tables were published more recently. The newer tables include separate mortality tables for smokers and non-smokers and the CSO tables include separate tables for preferred classes.

 Recent mortality tables predict that U.S. about 0.35 in 1000 nonsmoking men aged over 25 will die in the first year of coverage after underwriting. Mortality approximately doubles for every extra ten years of age so that the mortality rate in the first year for underwritten non-smoking men is about 2.5 in 1,000 people at 65. Compare this with the population male mortality rates of the United States of 1.3 per 1,000 in 25 years and 19.3 at age 65 (without regard to health or the consumption of snuff).

 Mortality of those subscribers increases much faster than the general population. At the end of 10 years the mortality of that year-old non-smoking male is 0.66/1000/year 25. Consequently, in a group of a thousand men of 25 years old with a $ 100,000 policy, all of average health a life insurance company would have to charge about $ 50 per year for each participant to cover the relatively few expected claims. (0.35 to 0.66 expected deaths in each year x $ 100,000 payout per death = $ 35 per policy). Other costs, such as selling and administrative expenses must also be taken into account when setting premiums. A 10 year policy for a 25-year-old, non-smoking, with preferred medical history can bid as low as $ 90 per year for a $ 100,000 policy on the life insurance market in U.S. competitive.

 Most of the income earned by insurance companies include premiums paid by policyholders, with a little extra money is through the investment of the money raised premiums. Rates charged for life insurance increase with the insurer's age because, statistically, people are more likely to die as they get older. The insurance company will investigate the health of an applicant for a policy to assess the probability of incurring a claim, in the same way that a bank would investigate the loan applicant to assess the probability of default. The group insurance policies are an exception to this. The research and resulting risk assessment is called subscription. Questions are asked health and lifestyle, with certain responses or revelations possibly worthy of further investigation. Insurance companies in the United States support the Medical Information Bureau (MIB), which is a clearinghouse of information on persons who have applied for life insurance with participating companies in the last seven years. As part of the application, the insurer often requires the consent of the applicant to obtain information from their doctors.

 Underwriters will determine the purpose of insurance, the most common being to protect the owner's family or financial interests in the event of death of the insured. Other purposes include estate planning or, in the case of cash-value contracts, investment for retirement planning. Bank loans or buy-sell provisions of business agreements are another acceptable purpose.

 Insurance companies are not required by law to guarantee or provide coverage to anyone, with the exception of Civil Rights Act compliance requirements. Insurance companies alone determine insurability, and some people, for their own reasons of health or lifestyle are considered uninsurable. The policy may be rejected or rated (increasing the amount of the premium to compensate for the increased probability of a claim).

 Many companies separate applicants into four general categories. These categories are preferred best, preferred, standard, and snuff. Preferred Best is reserved only for healthy individuals from the general population. This may mean that the proposed insured has no adverse medical history, is not under medication for any condition, and his family (immediate and extended) have no history of early onset cancer, diabetes, or other conditions. A preferred mean that the proposed insured is currently under medication for a medical condition and has a family history of particular illnesses. Most people are in the Standard category. Profession, travel history, and lifestyle factors to determine whether the proposed insured will be granted a policy, and that the category of insured falls. For example, a person who would otherwise be classified as Preferred Best may be denied a policy if he or she travels to a high risk country. Underwriting practices vary from insurance company to insurance company, to promote competition.

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