A Guide To Life Insurance - Till Death Us Do Part ....


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Till Death Us Do Part...

Whereas term assurance offers protection over limited periods, permanent protection is provided by the whole-life policy.

Here the company guarantees to pay the sum assured on death whenever this occurs in return for the payment of fixed annual premiums throughout life.

Though premiums are frequently made payable only up to retirement age or to age 65, the company is taking on a risk, as in term assurance, that the policyholder will drop dead the day after starting to pay premiums; but it is also taking on a certainty, the certainty that the policyholder will die at some time.

Since the sum assured is, therefore, definitely going to be paid out at some point, the policy can be regarded as building up towards this ultimate point, and it therefore acquires a surrender value.

If after a few years the policyholder wishes to stop paying premiums he will get something back from the life insurance company, and if he wishes to borrow against the security of the policy he may be able to do so.

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For a young man, the expected date of payment of the sum assured is so far in the future that the surrender value in the early years is very low.
The actuary can calculate it, for example, by working back from the sum assured which is assumed payable on death at the date corresponding to average life expectancy.
This discounting process works like compound interest, only in reverse, and, the longer the period to elapse before the payment of the relevant sum, the smaller the sum it........ see: click here for The Whole-life Policy


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