Life Insurance is a safeguard against the income loss that could happen if the insured person dies or passes away. The proceeds are forwarded to the designated beneficiary and he or she is shielded from the financial consequences that could arise from the insured person's death.
Life Insurance is an agreement or contract between the Insurance Company and the policyholder, in which the Insurance Company assures the payment of a particular amount of money if the insured person dies or passes away. For this, the policyholder pays a specific amount at regular intervals, which is known as the premium. In case of a Life Insurance Policy, the Designated Beneficiary receives the benefit if there is occurrence of an event, which is insured and the policy covers the event. For being a Life Policy, the primary condition is that the insured event has to be based upon the life (lives) of the persons whose names are present in the policy.
The insured events that are covered in a Life Insurance Policy are:
- Death
- Accidental Death
The following conditions are not covered but they can be insured by other insurance forms or riders on Life Policies:
- Diagnosis of a terminal illness
- Diagnosis of a critical illness
- Disability arising from ill health
- Necessity of Long Term Care
- Permanent Disability
Life based policies can be categorized into two main types:
Investment Policies: The primary goal of investment policies is to support capital growth in terms of payment of single or regular premiums.
Protection Policies: It is planned to offer benefits in forms of lump sum payments when there is an occurrence of a specific event.
In case of a Life Insurance Contract, three parties are present: the Insurance Company, the insured person, and the policyholder. However, most of the times the policyholder and the insured person is the same.
When the insured person dies or passes away, satisfactory death proof has to be submitted for the receipt of claim.
Life Insurance can be categorized into two main classes: Temporary and Permanent or following subdivisions: Term, Universal, Whole Life, Variable, Variable Universal, and Endowment Policies.
Temporary (Term): Temporary Life Insurance (Term Assurance According to British English) offers Life Insurance Coverage for a stipulated time period for a certain amount of premium.
Permanent Life Insurance: This type of Insurance Policy is active till the time of maturity, but if there is a failure on behalf of the policyowner for the payment of premium when it is due, the policy will expire. Permanent Life Insurance can be generally categorized into three types:
- Whole Life Coverage
- Universal Life Coverage (UL)
- Endowment Policy
