Second, defining life insurance based on the definitions given by different scholars on the terms and meanings of life insurance policy and adopted the meaning of the term as it is related to the study. Third, the literature review examined studies which have explained the importance of purchasing life insurance policy for buyers, predictors of life insurance, the role of insurance companies to increase the Life Insurance Market.
Finally, it is tried to summarize the relationship of review of the literature to the current subject under the study. Concept of Insurance The term Insurance is defined in different ways by different scholars in the field. It is complicated by its many possible meanings and definitions, however, scholars and writers have given various definitions of insurance from different perspectives such as economic, social, legal, etc.
For instance: Insurance is a financial arrangement that redistributes the costs of unexpected oasis. Insurance involves the transfer of potential losses to an insurance pool. The pool combines all the potential losses and then transfers the cost of the predicted losses back to those exposed. Thus, insurance involves the transfer of loss exposures to an insurance pool and the redistribution of losses among the members of the pool.
Certainty of financial payments from a pool with adequate resources and accurate predictability of losses are the hall-marks of insurance transaction. These definition presents fundamental nature of insurance that there are at least two parties in an insurance contract; the insured beneficiary and insurer; there is transfer of risk from one party insured to another party insurer ; the payment of price premium is mandatory by the insured for the transfer of risk; and the insurer, on its part pays a sum of money to the insured in the event of occurrence of risk and creates a loss to the insured.
Thus, while payment by the insurer is conditional, the insured is reducing its uncertainty concerning the financial consequences of the risk transferred through scarification of a small certain loss the premium. Therefore, insurance is a branch of contract law and thus the insurance policy, like all contracts, is an arrangement creating rights and corresponding duties for those who are parties to it. Insurance is an important growing part of the financial sector in virtually all the developed and developing countries Nigel and Richard A resilient and well regulated insurance industry can significantly contribute to economic growth and efficient resource allocation through transfer of risk and mobilization of savings.
In addition, it can enhance financial system efficiency by reducing transaction costs, creating liquidity and facilitating economies of scale in investment Bodla et al. Insurance business is usually divided into two main classes namely: 2. General insurance non — life insurance business This is a contract between an insurer and the insured where by the insurer undertakes to indemnify the assured against losses, which may result from the occurrence of specified events within specified periods.
This is a contract between the assurer and the assured whereby the assurer undertakes to pay benefits to the policy holder on the attainment of a specified event.
Life insurance business Life insurance business comprises individual life business, group life insurance and pension business, health insurance business and annuities.
Magee and David L. Bickelhaupt, ,. The above definition entails that like the general insurance, life insurance policy, has a contractual nature, in addition the policy provides methods for payment of the proceeds in installments or in some manner other than a lump sum; the choice is made by the insured, or by the beneficiary, if the insured has not made a choice.
As a social and economic device life insurance is a method by which a group of people may cooperate to ameliorate the loss resulting from the premature death of members of the group.
The insuring organization collects contributions from each member, invests these contributions, guarantees both their safety and a minimum interest return, and distributes benefits to the estates of the members who die Teklegiorgis Assefa , ,. From the above definition, for many people, the risk management tool that is most appropriate for dealing with the exposure of premature death is life insurance. In a personal risk management program, life insurance is an important technique for alleviating the financial consequences of premature death George E.
Rejda, ,. There are numerous life insurance policies that can be purchased to meet the financial goals and objectives of consumers. However, because life insurance policies are complex, consumers can become confused about the type of life insurance to buy.
Types of Life Insurance There are few types of life insurance policies, which are term life insurance, whole life insurance, universal life policy and variable universal life insurance. Term life insurance According to Mark S. Dorfman when a life insurer sells a term life insurance policy, it promises to pay the beneficiary if the insured dies within a specified period.
If the insured outlives the period, the insurer makes no payment. Thus, Term life insurance has several basic characteristics. First, it provides protection for a temporary period, such as one, five, and ten or twenty years unless the policy is renewed, the protection expires at the end of the period Most term insurance policies are renewable, which means the policy can be renewed for additional periods without evidence of insurability. The purpose of the renewal provision is to protect the insurability of the insured.
However, this results in adverse selection against the insurer. Therefore, to minimize the adverse selection, many insurers have an age limitation beyond which renewal is not allowed such as age 70 or 80 most of the time and others still to an age of Term life insurance is similar to property insurance because if there is no loss to a home or automobile while the policy is in force, the insurer makes no payment.
Moreover, like property insurance policies, term insurance does not build savings or cash value, as do other types of life insurance. Term life insurance is a relatively simple type of insurance, and in part for this reason, it has been among the first insurance products successfully sold on the internet market. However insurers sell several types of term life insurance policies including decreasing term, increasing term, level term, renewable term or convertible term. Term life insurance can prove useful in solving many financial problems.
Usually it can be used when the need for life insurance is temporary. It is also useful when people need the maximum coverage and have limited financial resources as well as the price of term insurance is attractive to many people. In the event of premature death, the education fund need can be met by a level term policy.
On the other hand, people often use term life insurance to repay debts as the need for term life insurance is temporary and most debts are temporary. In same manner some or all the need for the income to support dependents can be met by term insurance. The need for funds to support dependent children is temporary until once the children become financially independent, the need for funds to support those ends.
However, if a child or a spouse is likely to be a permanent dependent, perhaps because of a physical problem, then term life insurance is unlikely to be the best choice to fund problems caused by a premature death Mark S. Dorfman At any age, term insurance premiums are lower than whole life insurance premiums. Term insurance cannot solve all life insurance problems; however, generally it should not be used when the need for life insurance is permanent rather than temporary, as would be the case with a burial fund.
Nor can term insurance by itself provide a regular forced saving plan, therefore, insuring permanent needs while accumulating savings requires a whole life insurance plan. Whole life insurance As distinguished from term insurance, which provides short term protection, whole life insurance is a policy that provides life time protection.
Dorfman ,. Moreover, Whole life policies also promise payment if the insured reaches age When insurers make a claim payment, they say the policy has matured. The insurer knows for a certainty it must eventually pay a claim on every whole life insurance policy remaining in force Mark S. Therefore, whole life insurance in its saving value with its high premium is the basis of several important contractual rights for the insured.
More over still owners of whole life insurance can borrow some or all of the cash from the insurer at any time as whole life insurance combines both savings and life insurance protection.
Hence according to Mark S Dorfman the uses of whole life insurance policies are to meet peoples need with permanent protection combined with savings. In this case permanent protection needs include a burial fund and an income fund in cases in which a spouse, child or parent is permanently dependent on the insured for financial support.
Universal life insurance According to American insurance association Universal Life Insurance provides permanent life insurance protection and access to cash values that grow tax-deferred at competitive interest rates.
It is adjustable life insurance that allows flexible premium payments—at a scheduled or unscheduled time, but the policy will terminate at any time if the cash surrender value is insufficient to pay the monthly deductions, whether due to insufficient premium payment, if loans or withdrawals are made, or if current interest rates or charges fluctuate.
It will pay the benefit if the insured dies before the maturity date and pays the cash value if the insured is living at the maturity date. When a premium is paid, an expense charge is immediately deducted and the balance is placed in a cash value fund to earn interest at the current rate. Insurance expense charges necessary to keep the policy in force are paid internally, monthly, from the cash value, regardless of whether or not premium was paid.
The cost of insurance increases each year, based on your age; dividends are not payable. Rejda, From all the above definition it is possible to understand that universal life insurance provides life time protection and flexible premium policy that unbundles protection and saving components.
Endowment life insurance Another kind of life insurance policy is an Endowment policy, which pays the face amount of insurance if the insured dies within a specified period; if the insured survives to the end of the endowment period, the face amount is paid to the policy owner at that time Teklegiorgis Assefa From the above definition it is possible to see that Endowment contracts provide death benefits for a specified period of time, just as a term insurance does.
Thus, Endowment insurance may be a useful way for some persons to accumulate a specified sum over a stated period of time whether they live or die but most importantly the objective is to pay expenses during retirement, or to retire a debt. Importance of life insurance As one grow older, get married, build families and start businesses, it is important to realize more and more that life insurance is a fundamental part of having a sound financial plan.
Besides this, life insurance provides money typically to beneficiaries after the death of life insurance buyer. This is especially important for parents of young children or couples whose partner will find it difficult if they no longer have the source of income provided by their partner. It is also essential to provide enough money to cover the costs of hiring someone to cover the day to day household tasks, like cleaning, laundry, cooking, childcare and everything else a growing family needs.
This is a great way to set family members a solid financial future and provide for any monetary needs that will arise. Other expenses include funeral and burial costs that can easily run into the tens of thousands of dollars. Life insurance reduce the extra financial burden of spouse, parents, children or other loved ones to be left with any, in addition to the emotional burden they are already suffering.
It is not only necessary to get a quality college education, but to provide for other life ventures like getting married or starting a business.
For this reason, additional coverage is absolutely essential while dependant family members are still at home. But more than anything, life insurance can help provide protection for the uncertainties in life.
It could be today, tomorrow, or 50 years into the future, but it will happen eventually. Life insurance protects the heirs from the unknown and helps them through an otherwise difficult time of loss.
Empirical Review on Predictors of Life Insurance Life insurance is also an important mean by which the individuals with relatively low incomes can save and invest efficiently in the long run.
Indeed, the life insurance is a saving contract relatively simple that can be freely bought and regularly by small amounts. With the regular character or contractual of premiums payment by the policyholders, the life insurance companies arrive to mobilize the significant saving and stable compared to other financial systems.
Thus, in pooling the saving of small and large investors, the life insurance companies accumulate stable resources that can be used for heavy and risky investments that are beneficial to the economy Dickinson, In this way, the life insurance is an important instrument for economic development. Research conducted in world Redzuan identified that income is the key determinant in the consumption of life insurance both in the long- and short-run.
Evidence also suggests that income has a significant influence on family tactful consumption in the long-run, but its effect is less obvious in the short-run. The number of dependents, level of education, savings in the Employees' Provident Fund EPF , life expectancy and price of insurance are among the other factors that have a significant impact on the demand for life insurance and family tactful.
Beck and Webb conducted a comprehensive research over 68 countries of the world, paying attention to the question what causes the variance in life insurance consumption between different countries.
Four different measures of life insurance consumption and incorporate various economic, demographic and institutional factors used in their research. As a result, they found that countries with higher income per capita level, more developed banking sector and lower inflation tend to consume larger amounts of life insurance. In addition, life insurance consumption is observed to be positively influenced by private savings rate and real interest rate.
Such demographic factors as education, life expectancy, young dependency ratio does not have any robust influence on the life insurance consumption. They found that income plays a major role in the consumption of life insurance products.
An increase of 1 percent in aggregate income can be expected to induce at least a 0. In particular, the demand for life insurance decreases with the average life expectancy lower probability of death and increases with the dependency ratio number of dependents. Education level is positively related to life insurance demand, whereas the influence of social security expenditure is significantly negative. On the other hand, inflation significantly decreases the demand for life insurance.
High real interest rates do not persuade households to purchase more insurance, but actually stimulate them to reduce their purchase either because of higher expected benefits for the same invested amount or because of higher preference for immediate consumption relative to deferred consumption.
Based on panel data analysis for 14 selected CIS and CEE countries over the period Nesterova found that countries with higher life expectancy at birth, income level, old dependency ratio and countries- members of the European Union have higher levels of life insurance consumption, while financial development indicator, inflation and real interest rate reduce the demand for life insurance across countries.
Kjosevski found that GDP per capita, inflation, health expenditure, level of education and rule of law are the most robust predictors of the use of life insurance. Real interest rates, ratio of quasi-money, young dependency ratio, old dependency ratio control of corruption and government effectiveness do not appear to be robustly associated with life insurance demand.
Celik and Kayali investigated the determinants of demand for life insurance in cross section of 31 European countries. They found that income is the central variable which affects life insurance consumption. In addition, while the impact of population and income on demand for life insurance is positive, education level and inflation affect life insurance consumption in negative way.
Kakar and Shukla on their research on determinants of demand for life insurance in an emerging economy -India using logistic regression has confirmed that insured households tend to be more prosperous, more educated and more optimistic about future security than non-insured households. Both the level of education and occupation of the chief earner of a household are major determinants of life insurance participation, apart from asset-ownership. Further, households that are more optimistic about the adequacy of future income and savings show higher levels of participation.
Wang A study on the life insurance demand in a heterogeneous-agent life cycle economy suggest that the most important determinants of life insurance demand are financial vulnerability, the amount of financial support needed and life insurance premium. And the peak of life insurance demand for single-parent households is well before couple households. Moreover, increasing the number of children attributes a large increase of life insurance demand in single-parent households, but has no significant effect on couple households.
Dragos and Dragos analyzed the role of institutional factors in the promotion of life insurance activities on a sample of 31 European countries.
According to them, for that the life insurance sector emerges, it is necessary to have a favorable legal environment. Then, the results show that, the freedom to undertake influences positively the life insurance density, the easing of the tax burden stimulates the life insurance penetration and finally, a low level of corruption increases the life insurance density.
Research Conducted in Africa Lim and Haberman on their work identified that the savings deposits rate and price change in insurance are two important macroeconomic variables associated with the demand for life insurance in Malaysia. However, the finding on the savings deposits rate fails to show the expected negative sign.
They recommended as further research is needed in this respect in 13 orders to confirm the relationship between these two variables. A change in the price of insurance has a significant negative relationship with the demand for life insurance. Gustina and Abdullah in Malayasia found that, there are three variables that significantly influence the demand for life insurance; these are GDP per capita, saving and religion.
The study also reveals that, Customer Price Index is also one factor which affects the demand of life insurance. Loke and Goh on their study on demand for life insurance in Malaysia identified that socio-economic factors such as age, income, education, occupation, marital status and risk aversion play significant roles in the demand for life insurance.
However, gender and number of dependents are found to have no significant influence on the demand for life insurance Ibiwoye et. They found that real gross domestic product and structural adjustment policy positively and significantly influence Life Insurance consumption in Nigeria while indigenization policy and domestic interest rate are statistically significant but inversely related to Life Insurance consumption. On the other hand, they discovered that return on investment, inflation rate, openness of the economy and political instability are insignificant predictors of Life Insurance consumption in Nigeria.
Financial literacy, however, was found to be insignificant in determining life insurance demand. They showed that education level is significantly related to life insurance demand, where individuals with higher levels of education have higher life insurance demand. Curak et. Researches Conducted in Ethiopia As stated on Roman , In Ethiopia, the life insurance market is undeveloped, uncompetitive and there exist lack of information on the kind of life insurance that is currently provided.
Aderaw on his article on determinants of life insurance in Ethiopia examined the determinants of life insurance by a time series data for the period He identified that life insurance is determined by per capita income, life expectancy, real interest rate and inflation. It is suggested that life insurance industry in Ethiopia seriously consider these factors to bring growth in the insurance industry.
Predictors of Life Insurance Different studies suggests that several factors such as income, inflation, real interest rate, banking sector development, savings, unemployment, pension, price of insurance, education, life expectance, dependency ratio , religion and age are considered important predictors t life insurance policy purchase.
Reduzen , Beck and Webb , Nesterova ,Li et. The expected correlation of the income distribution of a country with life insurance consumption is ambiguous. Beenstock, Dickinson, Khajuria reason that wealthy sections of the population do not need insurance protection while poorer sections have a limited demand because they operate under income budget constraints.
A more equal income distribution with a larger middle class might therefore result in a higher demand for life insurance. On the other hand, while the middle-class may have the greatest demand for life insurance savings products, there may be a minimum level of income at which these policies become affordable.
The resulting relation of income distribution with life insurance consumption is thus ambiguous. Inflation Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.
If there is inflation, the demand and the purchasing power for life insurance decrease. Inflation and its volatility have a negative relationship with life insurance consumption. As life insurance savings products typically provide monetary benefits over the long term, monetary uncertainty has a substantial negative impact on these products expected returns.
Inflation can also have a disruptive effect on the life insurance industry when interest rate cycles spur disintermediation. These dynamics make inflation an additional encumbrance to the product pricing decisions of life insurers, thus possibly reducing supply in times of high inflation. The above stated articles have all shown that the use of life insurance is negatively related to inflation.
Banking Sector Development As identified by Beck and Webb life insurance demand is significantly influenced by the banking sector development. It is expected that banking sector development to be positively correlated with life insurance consumption. Accidental death benefit is an additional benefit in a permanent policy by extending the existing policy rather than issuing new policy and double benefit will be paid when accidents occur.
The additional sum is equal to the policy face amount when the benefit is for an amount equal to the policy, the benefit is often refers to as double indemnity. The additional sum may also be a multiple of the policies face mount or it may be an amount unrelated to the policy face amount. In order for additional to be payable, the insured death must occur within the specified number of death after the accident.
Loss a single said part of the body would entitle the insured employee to half the sum assured where as any combination two or more of these would entitle the employee to the full sum assured. Accidental death and dismemberment rider specifies that the insurer will not pay both accidental death benefit and dismemberment benefit for injuries in the same accident.
The payment of an accelerated death benefit reduces the death benefit that will be paid to the policy owner-insured. Terminal Illness Benefit Terminal illness benefit is a benefit under which the insurer pays a portion of the policies death benefit to a policy owner-insured that suffers from terminal illness and has a physician certified life expectance of 12 months or less. A statement attending by physician established evidences of a terminal condition and certifies that the insured likely to die within the time period specified in the rider.
Life insurance policy of NIC ii. Dread Disease Benefit DDB Dread disease benefit is the amount of benefit under which the insurer agrees to pay a portion of policies face amount to a policy owner-insured who suffers from one of a specified disease.
These specified disease or medical procedures has known as insurable events and usually include life threaten cancer, HIV AIDS, kidney failure, never attack, vital organ transplant disease and etc. The dread disease benefit may offer a premium waiver option under which the insurer agrees to waiver all renewal premium payable after accelerated death benefit payment Life insurance policy of NIC.
Health insurance scheme may only be offered to a policy holder together with the other basic policies i. The scheme requires that the treatment be carried out by a qualified and duly licensed medical practitioner. A policy deductable, called excess and duly licensed medical practitioner. A policy deductable, called excess, may attract a discount in premium. Life insurance policy of NIC 2. Underwriting Underwriting means all the activities necessary to select risks offered to the insurer in such a manager that general company objectives are fulfilled.
It can also be the process of identifying and classifying the potential degree of risk represented by proposed insured. This is also called selection of risk Greene, The risk appraisal procedure in life Insurance company is intended to determine the proper risk classification in to place a particular applicant.
In most life insurance there are three major applicants under which underwriter classify them. This is also known as class risk. Policies issue to substandard risks is often called rated policies.
Higher premium will be charged than in standard risks. The premium is likely to be high. It can be completed application form and non medical examination questionnaires W.
Heins, In most instances these documents will provide enough information for the underwriter to reach a decision about whether to issue a policy and what underwriting classification to use. However, when the policy is for an exceptionally large coverage amount or when some of the data suggest a problem companies may seek further information.
Chapter Three 3. Methodology of the study The methodology employed in the study was the case study which is the life insurance in the Nile Insurance Company. Data sources The source of data was heavily depends on secondary data which is obtained from different relevant books, published and unpublished materials, journals, articles, annual reports which is prepared by the NBE and the Nile Insurance Company.
Analysis of data As a means of data analysis the descriptive statistics was applied to test the trends of the growth of the company, premium collections and claim payments by using charts or tables, graphs and so on.
This paper particularly focused on the main type of cover that contributes to the high premium collection in relative terms such as endowment life insurance, group term life insurance, and medical expense insurance and permanent life insurance. This paper also tried to show the growth and the performance of life insurance business using different growth measurement. It also tried to identify some factors that affect the life insurance growth and performance through data analysis and successes review of result.
Chapter Four 4. Data Presentation and Analysis As the main propose of this study was data analysis and presentation of the results, it was to present the data and finding based on financial statements that are prepared by the account department of the life insurance main branch. The Structure and Trend of Life Insurance The structure and trend of life insurance is examined in this paper in connection with market share and against different performance measurements.
For the purpose of the simplify and understanding, the paper presents the structures of life insurance business in Nile Insurance Company S. The Structure of Life Insurance Business in Terms of Market Share The market share of private life insurance including Nile insurance company is very low when we compare them with non private insurance company such as Ethiopian Insurance Corporation due to it is early establishment, where as private insurance companies are in their infant stage.
According to some document and research papers, the researcher have looked the following factors with may negatively contribute to the growth of life insurance among private companies. The demand for life insurance is very low in our country because of lack of awareness on important of life insurance. The attitude of public to consider insurance as luxury rather than the necessity and the limited level of income of citizens affected the growth the life insurance NIC, The occurrence of risk on a life insurance is higher than that of non life insurance.
Risks in life insurance like illness and death of individuals are frequent and certain.Term insurance cannot solve all life insurance problems; however, generally it should not be used when the need for life insurance is permanent rather than temporary, as would be the case with a burial fund. L Carter , Economics and Insurance. Therefore, the result of this paper will have great contribution to the body of knowledge. In recent marketing concepts ; while selling is concerned with creating demand for the products that have already been decided, marketing is directed towards identifying the needs and wants of consumers and planning to satisfy those needs. Moreover, increasing the number of children attributes a large increase of life insurance demand in single-parent households, but has no significant effect on couple households. All the above from the very origins of insurance Correlation Coefficient Analysis and Multiple Linear Regressions. At the life of his insurance inthe jurisdiction of the theses Thesis wp theme 2013 chevy insurance matters had been established. The questionnaires will be analyzed using descriptive analysis, Pearson has helped mold the modern law of insurance.
It usually involves weekly payments collected directly by representatives of the company. So, the total population is Different variables are expected to affect the life insurance purchase in Tigray. Financial literacy, however, was found to be insignificant in determining life insurance demand.
Thus, in pooling the saving of small and large investors, the life insurance companies accumulate stable resources that can be used for heavy and risky investments that are beneficial to the economy Dickinson, The two most important classifications are as follows : First and third party insurance, the distinction between first and third party must be made first of all. These self help institutions of society had been in service of general public of our country since long time in the remote past. Working Paper, 36, The law of insurance has not changed much since then, marine insurance was codified in the Marine insurance act and its special doctrines are sui generis.
They showed that education level is significantly related to life insurance demand, where individuals with higher levels of education have higher life insurance demand. Underwriting Underwriting means all the activities necessary to select risks offered to the insurer in such a manager that general company objectives are fulfilled. By leveraging their role as financial intermediaries, life insurers have become a key source of long-term finance, encouraging the development of capital markets Catalan, Impavido and Musalem, A review of literature also indicates that studies related to life insurance demand have been mainly conducted in the USA, Malaysia, China and some European countries. Industrial Life Insurance This type of life insurance currently represents a very small area of coverage. The state owned insurer EIC, the monopolist insurer under the communist regime, remains the largest insurer in the country, with a great share of the market as at AXCO,
Expenses for supplies 2.
More over still owners of whole life insurance can borrow some or all of the cash from the insurer at any time as whole life insurance combines both savings and life insurance protection. General objective The general objective of this research is to investigate the predictors and analyze their impact on life insurance policy purchase in Tigray. On the other hand, inflation significantly decreases the demand for life insurance. According to University of Illinois Extension, purpose of life insurance is to protect the family from financial loss due to death and some families buy life insurance as their retirement plan. There is significantly positive relationship between financial sector development and life insurance penetration. An increase of 1 percent in aggregate income can be expected to induce at least a 0.
The life insurance sector which is one of the major sections in EIC t h a t has a long age of experience is responsible for insurance service dealing with the provision of different types of life insurance policy including endowment, term and whole life, and other types to the buyers. It is complicated by its many possible meanings and definitions, however, scholars and writers have given various definitions of insurance from different perspectives such as economic, social, legal, etc.
Then this study will describes and predicts the impact of LIP Tigray. In relation to descriptive research design, inferential statistics was also employed to find out the relationship, significance and impact of independent variables on the dependent variable. This is a contract between the assurer and the assured whereby the assurer undertakes to pay benefits to the policy holder on the attainment of a specified event. However, when the policy is for an exceptionally large coverage amount or when some of the data suggest a problem companies may seek further information.
Four different measures of life insurance consumption and incorporate various economic, demographic and institutional factors used in their research. Consumers prefer to consider other alternatives of saving if the effective return within an insurance policy is lower compared to those offered by other saving instruments Redzuan, ; there is a wealth-replacement effect which means that higher private savings displace life insurance and the higher the savings that an individual has, the less would be the motive to buy life insurance to supplement these financial resources in order to reach a targeted level of wealth for retirement. Although non-marine insurance is still based on case law, the Marine insurance act serves as an occasional reference, which provides authority for a principle also valid in non-marine insurance. On the other hand, they discovered that return on investment, inflation rate, openness of the economy and political instability are insignificant predictors of Life Insurance consumption in Nigeria. Concept of Insurance The term Insurance is defined in different ways by different scholars in the field.
Therefore, this study is trying to investigate the most important affecting factors in life insurance policy purchase decision. The risk appraisal procedure in life Insurance company is intended to determine the proper risk classification in to place a particular applicant. Six factors have been identified based on theoretical and empirical reviews. High real interest rates do not persuade households to purchase more insurance, but actually stimulate them to reduce their purchase either because of higher expected benefits for the same invested amount or because of higher preference for immediate consumption relative to deferred consumption. But, it was disclosed that when people grow up they have a greater awareness on the need of life insurance but the need of life insurance will decline as the people reach beyond a certain age.