Life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money (the benefit) in exchange for a premium, upon the death of an insured person (often the policy holder). Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policy holder typically pays a premium, either regularly or as one lump sum. Other expenses, such as funeral expenses, can also be included in the benefits.
Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot, and civil commotion.
Modern life insurance bears some similarity to the asset management industry and life insurers have diversified their products into retirement products such as annuities.
Life-based contracts tend to fall into two major categories:
• Protection policies: designed to provide a benefit, typically a lump sum payment, in the event of a specified occurrence. A common form—more common in years past—of a protection policy design is term insurance.
• Investment policies: the main objective of these policies is to facilitate the growth of capital by regular or single premiums. Common forms (in the U.S.) are whole life, universal life, and variable life policies.
• Life Insurance works around PIP
Life Insurance Covers Risks & increase savings.
Risk 1 : Early Death – Term insurance
Risk 2: Extended Life hard to meet living expenses Pension products
Investment : Products help to achieve long goals like Child Policy
Saving : Long term vision to save funds to be utilized later on big investment activities