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LIFE INSURANCE

General Principles of Life Insurance:

Economic, actual and legal principles relate to general principal of the Life insurance.

1. Economic Principles:

Saving attribute is part of the foundations upon which prosperity of individual is based on. When no. of people having saving habit increases then strength of community increases Therefore, a system is require to establish the saving habit among the people to create a wealthy nation. This procedure become important when saving is for family or for long term planning. Life insurance provides such thought of encouragement and psychological effect upon the individual in this sector.
Payment of the very first premium creates the immediate monetary estate which is the unique feature of the life insurance. Not only this, but psychological benefits like worry free life and collaboration of the mind with physical body that helps in the working of routine work are unlimited.
A sound education is provides the foundation for the civil and literate society. Only education is the best way for character development of nations. Not only this, but every parent has dreams about their children and also children have dreams regarding study. Just in case of the uncertain death of parent results in elimination of the education purpose just to tackle the severe situations in the life. And goals of the life become narrow down and results in decrease in the morale of children. All the long term plans regarding study of the children finishes. If, in any case, education carries on after the sudden death of parents, children study in low standard schools which do not cover the abilities of child. But, the families having the life insurance, at least cover the following financial incident by lifting the weight of all educational expenses of children. These benefits are the best in the social life of people.

2. Actual Principles:

If an actuary or a mathematician has at his disposal a mortality table say, 100000 infant at birth, calculations become easy for the possibilities of death and survival. These facts are based on the hypothesis that the mortality rates are applicable to each age.
With developments in medical conditions, there has been a recurrent improvement in mortality, so that a mortality table reduces. Pure probability of event dependent upon human life, the actuary, can express it in a present monetary value.
All such calculations are based on unchanging mathematical values.
The accidental of a fire occurring in one particular building in a state of good repair is very much the same one year as the next. In significance, the premium for the fire insurance is usually the same every year. However, the chance that death will arise in a particular year is greater among elderly persons than young men and women.
Therefore, for the same sum assured, a person aged 60 must pay a higher premium than a person aged 25 when both seek life insurance cover just to make sure of paying premium. That is, premium is directly proportional to the risk involved.