Life insurance is an agreement between an insurance policy holder and an insurer according to which the insurer takes an obligation to pay a specified sum of money in case of the insured person’s death. Some contracts may specify not only death but also illness as an insured event. The contract obliges the insured person to pay a premium on a regular basis or as a lump sum.
US insurance industry is the most developed insurance market in the world and exists since 1830. Among the variety of offers personal insurance is the most noticeable one and includes life insurance, annuity or pension insurance and insurance against illness and accidents.
Life insurance is an important area of activity for the American insurance companies. It offers a wide range of insurance warranties as well as investment services allowing a person to solve a set of social and financial tasks. Social tasks help to overcome the imperfections of state social insurance and security system. Financial tasks help increase the personal income and provide the necessary guarantees during the implementation of certain financial and credit operations.
You may conclude different types of life insurance agreements in the United States.
A common life insurance contract means that you pay insurance premiums for all your life.
Life insurance with a limited term requires the payment of insurance premium during a certain period of time. You may pay partially or give a total amount at once, in this case the insurance policy is considered to be paid. The amount specified in the insurance contract is entirely paid in case of insured person’s death. Another similar option is the insurance with the payment of the entire sum after a number of years indicated in the policy or after the death of the insured person.
Conditional life insurance that is valid only during a short period of time, usually several years. A typical example of this type is the insurance of debtor’s life during the loan duration period.
Nevertheless, universal insurance is the most popular type of insurance in the USA. The amount of annual payments is determined independently by the person that signs the insurance policy. The company divides these payments into three categories. The first part goes for the accumulation of the principal amount to be paid in case of insured person’s death, the second one is transferred to a special bank account where the interest is accrued and, finally, the third one is used to cover the costs of the company. Company is obliged to indicate which amounts were transferred to the abovementioned accounts during the year in its annual reports.
Apart from individual life insurance there is also a group life insurance. Sometimes it is called institutional life insurance or wholesale life insurance. This kind of insurance may cover a group of people, like company’s personnel or the participants of an association.
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