Insurance
Life is a risk. As we go about our daily activities, we are bound to face accidents, illnesses as well as death. When this happens, our families suffer greatly, especially because in most cases, they are not prepared for such eventualities. Luckily for us, there is something we can do about it and this is taking precaution in the form of life insurance.
This is nothing more than a contract that one signs with an insurer. They get to agree that in the event that any of the above happens to an individual, the insurer will pay a given amount of money to the beneficiary that the person chooses. However, there is a cost to the agreement. The person being insured is also known as the policy holder. He must agree to pay some agreed upon amount of money to the insurance company.
It is from this lump sum that the policy holder will be compensated, depending on what happens to him. One therefore has to choose what they want to take precaution against. For example, if you are taking caution against motor vehicle accidents, the company may not compensate you if you get injured in a fire that consumes a building.
The money that one pays at stipulated intervals is referred to as premium. The value is determined depending on what the policy holder feels is the value of his own peace of mind. That is to say that it is dependent on how much he feels that his beneficiaries should be given once these eventualities take place. It is difficult to place a value on someone’s life and that is why the policy holder should determine just how much he is able to pay in terms of premiums.
As earlier mentioned, there are several categories under which a person can buy a policy. Serious illnesses is among them. If one gets hospitalized, the insurance company will pay a given percentage towards the hospital bill, leaving the family of the insured to pay the rest of the amount. Most of the eventualities that one may get cover for are mostly natural. It may be hard to get cover for man made disasters or manually manipulated accidents like war, riots and civil strive. However, not all naturally occurring disasters may be given cover, for example drought and floods. Life insurance also covers death.
However, this is tricky because the cause of death has to be clearly understood. The company will state out clearly its limits to liability upon death. For example, it may not compensate the beneficiaries in case death happened as a result of suicide or wrangles within the family. Compensation may also be determined by the type of contract the policy holder had signed for. For example, if it was a protection policy, that would be fine. However, if it was an investment policy which was meant to facilitate growth for the premiums, then there might be no compensation.
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