life insurance

The Concept Of Life Insurance 2

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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life insurance

The Concept Of Life Insurance

The Concept Of Life Insurance

life insurance

Each person’s health and life is the ultimate value. Therefore, from the very beginning the insurance activities assigned them to risks associated with a person’s life, health, and gave them much attention.

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There have been developed and used various types of insurance, which have made people’s lives safer and happier. In the developed countries focus on personal insurance is very high. Almost half of all insurance contributions are assigned for various types of personal insurance. However, together with the growing understanding of insurance importance, the personal insurance services needs are also growing. In the case of life insurance in the first place there is the idea of capital accumulation. Policyholder accumulates capital for any foreseeable future needs.

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The most common practice in capital accumulation is intention to secure current living standards after retirement (retirement insurance) or in the case of an accident (disability insurance). Often, policyholders question the necessity of life insurance.  In fact, you can raise capital in other ways, for example, monthly deposit assets in a savings or time deposit account, investing in shares of various companies or government securities. Capital accumulation based on periodic life insurance contributions is superior to other methods with regard to capital accumulation for a number of reasons.

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