Life Insurance’ or ‘Life Assurance’ these days all of us give a lot of thought into, only a handful know how life insurance works. Moreover, there are large numbers of life insurance policies that are available for the general public to choose from. This can in fact confuse the customers as a result; he may get a totally inaccurate of insufficient policy for his needs. Also, there are so many life insurance agents who exploit such naïve people. Without knowing the nitty-gritty’s of life insurance, it is impossible to get the low cost life insurance.

Basic classification of Life Insurance
1. Term Life Insurance
2.    Permanent Life Insurance (The sub classifications are-)
-Whole life Insurance
-Universal Life Insurance
- Variable life insurance.

While term life insurance is meant for specific short periods; permanent life insurance is for the entire duration of an individual’s life.  Term life insurance cost can vary but is generally less than permanent life insurance cost.  To know more about these types of insurance and the sub types, we can look up insurance websites.  Let us now see how life insurance in general works.

An actuary will use simple mathematical formulas to identify premium for you. People who have the habits of smoking, taking drugs or ones who eat junk food are likely to die early in their life. Hence such people might pay more towards insurance premium than the others. Besides lifestyle questions, there are other questions and compulsory medical tests one has to take up to determine premiums. 

Once the medical test is taken and there are no alarming results from it, you can get insurance and the premiums are usually calculated based on the criteria you fall under. The risk criteria depend on points such as lifestyle, work nature, gender, race etc. There is also an option wherein you do not have to go thru the medical tests, yet you can get the insurance you want. It is life insurance no exam policy in which all you need to do is fill up the questionnaire about your health status and if you are able to convince the insurance company, you can get insurance under this type.

The points to be considered while choosing the insured amount is critical. Points such as a prediction of your future outstanding debt and the amount of money you want your family members to use after your demise. Ideally anywhere between 8 to 10 times of your salary would be the best estimate. Your recipients of insurance should not a profile that creates doubts in the insurance company’s mind. If so, your application will be rejected. 

In your application; you need to mention the real facts about your life style. Even if your application is accepted and later on, found that false information was given, then the company would cancel the application and the entire amount paid until that time would be lost. The company would ask personal and uncomfortable questions and certainly this information would be kept secret. These points are only for the good of the insurer and are noted to work out the premium. If suicide or murder of insured takes place, no amount will be paid by the company to the beneficiaries.

The process of applying for a life insurance policy has many folds. First point is the filling up of the application forms. Then the insurer needs to undergo a medical test. The results of the medical test need to be enclosed along with the application. Then the filled up application; will be sent to the scrutinizing authority for further check. Your risk factor would be computed by statistical analysis by the authority. Then the application could be placed under a specific category.

Methods such as ‘cost per thousand’ table, the exact premium amount will be calculated. At this juncture insured with great risk will be rejected. Once the policy is granted, the insurance contract will be issued with information about coverage amount, premium amount and with terms and conditions. Take professional help on understanding the contract. After signing on it and returning it, you are now eligible to make payment towards your premium payment and you now have your own policy.