Another term that can be used interchangeably with life assurance is life insurance. The term refers to a contract that is agreed by an insurance policy holder and an insurer. In the agreement the insurer promises to credit a specified beneficiary a specified sum of money known as the benefit. This payment is effected after the policy holder has passed away. Other conditions such as terminal ailment may also effect the payment depending on the conditions set out in the contract.
The policy holder on the other hand has to pay money in lump sum or in regular premiums. The main reason of paying this premiums and signing up for life insurance is to have peace of mind since the beneficiary will have money to rely on after death of the insured person. Terms and conditions of the insurance policy are decided upon and they determine the limits and the events that can be insured. Exclusions can be made so that the insurance company is not liable to pay for claims which result from events such as civil commotion, fraud, suicide, riots and war.
Contracts for life insurance are usually in divided into two. The first type is the protection policy. This policy is made to provide benefit for a specified event and it is paid in a lump sum. The second kind of contract is called an investment policy. It is designed to be paid in regular or a single premium.
Life insurance and life assurance are sometimes not interchangeable. When used together insurance is taken to mean coverage for situations that are not guaranteed to take place such as fires and theft. Assurance on the other hand is used for events that are guaranteed to happen. These are events like death of a person.
The policy owner and the insured are taken to be one and the same thing, however in some situations they are two different entities. In case an individual purchases a policy on his/her own life then he/she is the owner and the insured. In an example where a husband buys a policy for his wife then the husband is the owner of the policy and the wife is the insured. Insured parties are not necessarily parties in the contract and the owner is the individual who pays the money.
When the insured person passes away the beneficiary is credit with the lump sum. Only the person who purchases the policy picks the beneficiary. The beneficiary does not take part in negotiating the contract. The owner of the policy can decide to change the beneficiary after some time but in the case where the contract states that the beneficiary is irrevocable the beneficiary must consent.
CQV in the contracts is the insured person meaning celui qui vit. Insurance companies have set rules that limit people who can be beneficiaries and policy buyers. The purchaser should be persons with an insurable interest such as family members or partners in business.
The requirement of insurable interest must prove that the purchaser of the policy will have a loss in the case that the insured dies. This prevents persons from buying the policy when they know that someone will die. It also prevents the buyer from killing the CQV for the claim.
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