life insurance

The Concept Of Life Insurance 2

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The Concept Of Life Insurance 2

life insurance

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First of all, because of the tax concessions applied for the life insurance. In most of countries the insurance law foresees that life insurance premiums paid by natural or legal entities reduce a taxable income or respectively taxable profit by a commensurate amount. For the capital accumulated during the period of life insurance policyholders are generally reckoned in a much higher interest rate compared with monetary funds kept in bank accounts. In addition, the law often provides policyholders the right to a certain profit share of the insurance company, received during the investment activities.

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Policyholder’s capital, accumulated during the life insurance activity, must be invested on the basis of profitability, liquidity and safety principles. Cumulative life insurance can be considered as a one of the safest ways of capital accumulation. Life insurance, depending on whether there are being carried out risk operations, capital accumulation and release activity, or both of these activities together, is divided accordingly into: pure risk life insurance; pure capital accumulation insurance; composite life insurance.

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Such a distribution of life insurance covers all possible types and groups of life insurance. On the basis of risk life insurance contract the policyholder undertakes the responsibility to pay a certain amount of insurance premium and the insurer, in the case of insured event (the case of policyholder‘s death to be specific) undertakes the responsibility to pay a certain amount of insurance payout. By signing risk life insurance contract the insurance company takes the risk of death of the insured. In such case capital accumulation activities are not performed. The pure risk life insurance contracts present only a small part of all life insurance contracts.


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