ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Life Insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a sum of money to the beneficiary when the insured person dies or after a pre-determined period in exchange for the premiums paid by policyholder.

Detailed explanation-2: -What is a beneficiary? A beneficiary is the person or entity that you legally designate to receive the benefits from your financial products. For life insurance coverage, that is the death benefit your policy will pay if you die.

Detailed explanation-3: -Depending on the insurer, a life insurance payout can typically be distributed in three ways: in the form of a lump sum, via a life insurance annuity, or through a retained asset account.

Detailed explanation-4: -If the insured passes first, then the beneficiary’s heirs or estate will receive the death benefit. If there are no beneficiaries left alive at the insured’s death, the death benefit will be added to the insured person’s estate.

Detailed explanation-5: -Your primary beneficiary is the first person you want to receive the benefit from your life insurance policy when you pass away. Your contingent beneficiary, or secondary beneficiary, will receive the benefit if your primary beneficiary can’t or won’t.