life insurance is not new when it comes to people who want to render themselves inside these said insurance companies because of the benefits they can get but the chances that this companies will close is nearly 50/50 which means you don’t have any assurance regarding in satisfying yourself or they could grant the said contract without any faults or problems. Insurers should know the risks/benefits they can get before entering this kind of transactions
Pros and Cons of Insurance Companies: An Exploratory Study
INTRODUCTION.
(Background of research)
Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money (the “benefits”) upon the death of the insured person. The advantage for the policy owner is “peace of mind”, in knowing that the death of the insured person will not result in financial hardship for loved ones and lenders. It is possible for life insurance policy payouts to be made in order to help supplement retirement benefits; however, it should be carefully considered throughout the design and funding of the policy itself. Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot and civil commotion.
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STATEMENT OF THE PROBLEM
The main objective of the study is to know more about what is happening in a world of financial issues regarding in insurance companies. Here are the questions that this paper will try to answer:
What are the benefits/risks when you engaged yourself in an insurance company/
Why some life insurance companies undergo to a bankruptcy?
How does an insurance company handle people’s money?
Pros and Cons of an insurance company
Importance of the paper
For those who want to know how important life insurance in our daily lives. They also have to learn how their lives would be convenient. Many Life insurance companies close due to lack of trust of people in this type of organization and this research paper will cite some of those risks that will help future insurers what to know before they enter this kind of company that can do a large part for your family in the near future.
Definition of terms
Bankruptcy-The state of being completely lacking in a particular quality or value Beneficiary- One that benefits from something; The person designated to receive the income of trust estate Convenient- Suited to personal comfort or to easy performance Insurance- The business of insuring persons or property
Insurer- One that insures; specifically an insurance underwriter Insolvency- Inability to pay debts
Investment- outlay of money usually for income or profit
RISK – uncertainty of a financial loss; term used to designate an insured or
a peril insured against.
RESEARCH BODY
Life today is full of uncertainties; in this scenario Life Insurance ensures that your loved ones continue to enjoy a good quality of life against any unforeseen event. Life insurance helps protect your family financially by replacing some or all of your income after you dies. In some cases, you might want to buy a life insurance policy on someone else and name yourself as the beneficiary. For instance, if you are divorced and get child support, you might want to buy a life insurance policy on your former spouse. With only a few known exceptions, life insurance companies that have become insolvent over the past thirty years have been financially marginal, low rated, stock insurance companies operating on a regional basis. These companies typically have a sign of financial weakness, and have been no different in financial make-up from financially weak companies in the industrial sector. Yet, death claims made against insolvent carriers in all cases have been paid in full. There are only two highly rated carriers licensed in all 50 states that have experienced severe financial difficulty, Executive Life Insurance Company (ELIC) and Mutual Benefit Life Insurance Company (unrelated to Mutual Benefits Corporation, a failed life settlement provider In 1991, as the recession deepened and the real estate market softened, Mutual was left with too many nonperforming loans that lead to bankruptcy. Causes of Bankruptcy in some insurance companies
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Insolvency/Bankruptcy is when an insurance company becomes obsolete and does not have the funds to pay claims for death benefits. Discounts for Large Death Benefits Some insurance companies offer discounts for large death benefits. Basically, in a situation where the insurance company offers a discount for a large death benefit policy the insured individual has an opportunity to save money by purchasing only one plan and by keeping their life insurance with that one company. An individual with several smaller death benefit policies at various life insurance companies can potentially miss out on such a discount. Confusion With there being so many different types of life insurance available, having multiple plans at many insurance companies can cause confusion. Trying to keep the plans details straight and trying to remember what plan has certain provision, such as which policy is the permanent plan and which policy is the term plan can cause confusion and can cause an insured person to mix up provisions with each company on different policies.
These are some of the reasons why some insurance companies undergo in bankruptcy. But If there’s a reason, there’s a solution. You can have the best protection against insurance company bankruptcy is to consider a company’s financial health when you buy insurance. Some people prefer to purchase insurance from large companies, reasoning a large company is less likely to go bankrupt than a smaller firm. This line of reasoning can be misleading: The last few years have seen major insurance companies going bankrupt. Size isn’t always a sign of fiscal stability.
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Pros and Cons of an insurance company
PROS:
1. Mental peace
The most important benefit of life insurance is that it assures mental peace. When a person goes for life insurance, he and his family are relieved from worries of future. Thus, it ensures mental peace. 2. Financial Security
The policy of life insurance provides security to the family of the policy holder in case of death of the breadwinner. On some circumstances of this unfortunate event, the family is forced with a cash crunch. But by availing a life insurance policy, this problem of cash crunch is solved by a lump sum amount paid by the insurer. 3. Loan in case of need
There are circumstances in life when the individual needs funds but is unable to get from various sources. The life insurance policy also provides a solution to this problem as loan can be taken against the policy and need not be repaid as the loan amount is deducted from the police value on maturity. 4. Cover for whole life
The life insurance policy provides coverage for the whole life of the policyholder. It also provides protection in cases of serious illness. 5.
Tax-free source of savings
In addition it is a source of savings which is completely tax-free 6. Source of mitigating certain liabilities
The life insurance policy provides a great source to satisfy certain needs and liabilities like loans and mortgages. 7. Maintenance of living standard
The life insurance policy helps in maintaining the living standard of the family even after the death of the breadwinner by providing financial benefits to the family. 8. Enhanced coverage
The policy provides enhanced coverage by providing for medical benefits.
CONS:
1. Expensive
The life insurance can prove to be a costly affair, particularly when suffering from illness and regarded by insurers as High Risk due to some reasons like old age etc. 2. Irrelevant in case of no-family person
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... Term Life Insurance Term life insurance provides a death benefit only if death occurs during the 'term' or coverage period of the policy. If ... borrowing. You may borrow from the insurance company, using the cash value in your life insurance as collateral. Unlike loans from most ... pay the premiums rather than deprive their family of the protection the policy provides. Paying the premiums means making ...
The life insurance policy is irrelevant for an individual who is not having any family or dependents 3. Increasing premiums
The premium payable increases with the increase in age. But the income gradually decreases which makes it difficult to strike a balance. 4. No benefit in case of long life
Some policies do not provide any cash benefit on the policy holder surviving the policy term. In that case, amount paid for premiums is wasted. From the above discussion, it becomes clear that though life insurance is a mixed blessing, yet its advantages outweigh its disadvantages. But at the same time, it depends on the requirements of the individual.
SUMMARY
This study shows about the significance of the insurance companies. This contains the benefits of insurance companies that will surely help you throughout your daily living. It can be used for your retirement, for the educational needs of your children and some circumstances that needs money investments for the future. This is intending for you to know what are the risks and benefits you will get in getting your money to be insured.
Conclusion
As the study goes here are my conducted conclusions.
1. If there are some uncertainties or risk once you enter an insurance company but there is also a solution like knowing a bit of knowledge about it so that you can avoid situations that can lead you to scams or problems involving your money. 2. Having an insured money can help you also for your future you can build a foundation for your family’s needs. 3. You can have your satisfaction with your money by knowing the risks and the benefits on applying in those said insurance companies. 4. Engaging yourself in insurance companies doesn’t mean that your money is safe you must know the negative things that can happen once you lend your money to some of those insurance companies.
REFERENCE/Words Citation
http://en.wikipedia.org/wiki/Life_insurance;
http://www.sunlife.com.ph/slfglobal/v/index.jsp?vgnextoid=a97ed9d30f112210VgnVCM1000009b80d09fRCRD&vgnLocale=en_CA http://en.wikipedia.org/wiki/History_of_insurance
http://worldhealthtalk.net/the-pros-and-cons-of-life-insurance/
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