In this world, no one knows what will happen in future. If we all are able to predict the future dangerous correctly then we can take a safeguard action to move out of the danger but the problem is that we cannot predict the death, disaster and danger. Life being the most important asset of an individual, Life Insurance enjoys the maximum scope. Life Insurance is of great importance to individuals. Life Insurance Protect us from unforeseen hazards or danger.  In Modern Times throughout the world, the life insurance policies fall under six important kinds of policies, which are - Whole Life Insurance, Term Life Insurance, Endowment Policy, Money Back Policy Annuities and Pension Policy, Children's Policies.


What is Insurance -


Insurance is a contract between the insurer and insured under which the insurer undertakes to compensate the insured for the loss arising from the risk insured against. In simple words, Insurance is a contract in which one party (the insurer), for a consideration (the premium), assumes a particular risk of the other party (the insured) and promises to pay to the other party or his beneficiary, a certain or ascertainable sum of amount on the happening of specified contingency against which the insurance is asked for.

Definition of Insurance -


Some Important Definitions of Insurance are as follows -

John Megi - "Insurance is a plan wherein persons collectively share the losses of risk"

Justice Tindall - "Insurance is a contract in which a sum of money is paid to the assured in consideration of insurer's incurring the risk of paying a large sum upon a given contingency."

Encyclopaedia Britannica - According to Encyclopaedia Britannica, " Insurance may be defined as a social device whereby a large group of individuals, through a system of equitable contributions, may reduce or eliminate the measurable risk of economic loss common to all member of the group"

Ghosh and Agarwal - According to Ghosh and Agarwal," Insurance is a Co-operative form of distributing a certain risk over a group of persons who are exposed to it"


What is Life Insurance -


Life Insurance provides for your family or some other named beneficiaries on your death. Life Insurance guarantees a specific promised sum of money to a designated beneficiary upon the death of the insured, or the insurance if he survives the term of the policy. Life being the most important asset of an individual, Life Insurance enjoys the maximum scope.There are two general types of life insurance-1) Term Insurance and 2) Whole-life Insurance. Term insurance provides coverage only during the term of the policy and pays off only on the insured's death, on the other hand, Whole-Life Insurance provides saving as well as insurance and can let the insured collect before death.
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 insurer; common examples are claims relating to suicide, fraud, war, riot etc


Kind/types of life insurance -



1) Whole Life Policy -

     
        The whole life policy run for the whole life of the assured. It gives lifelong protection. Under this plan, the policyholder pays regular premiums until his death.The sum assured becomes payable to the legal heir only after the death of the assured.It means the family of the assured can continue to be financially stable after the death of assured.  There are three types of whole life policy -

      (a) Ordinary whole life policy - Premium is payable periodically throughout the life of assured.

     (b) Limited payment whole life policy -  Premium is payable for specific Period.


     (c) Single premium whole life policy - The entire premium is payable in one single payment


2) Term Insurance Policy - 


          Term insurance policy is pure risk cover for a specified period of time.  In this type of policy, Insurance Company promises the insured for a nominal premium to pay the face value mentioned in the policy in case he is no longer alive during the term of the policy

Example- 
         
      If a person buys $ 1,000,000 policy for a term of 10 years, his nominee or beneficiary is entitled the money if he dies within that 10 years Period. save the policyholder survive the 10 years period, the Insurance Company keeps the entire Premium paid during the 10 years period. No premium shall be refunded. Hence there is no element of saving or investment in such policy.  It is a hundred percent risk cover.
     
     In simple words, a person pays a certain premium to protect his family against his sudden death.   he forfeits the amount if he outlives the period of the policy.  This clan is most suitable for those who are initially unable to pay high premiumThis is the cheapest insurance available


3) Endowment Policy -


     Endowment policies are the most popular policies in the world of life insurance. In this type of policy, the insurer agrees to pay the assured or his Nominee specified sum of money on his death or the maturity of the policy whichever is earlier.A pure endowment policy is also a form of financial savings, whereby the person covered remains alive beyond the tenure of the policy, he gets back the sum assured with some other investment benefits. The Premium for the endowment policy is comparatively higher than that of the whole life policy. It provides protection to the family against the untimely death.

4) Children's Policies -


    Children's policy can be taken in the name of the child or parents but it is only for the benefit of the child.  This policy is useful because of various needs of children, such as education, marriage, security of life etc.Some of the children policies are -

               a) children endowment policy

               b) marriage endowment and the educational annuity plan.

              C) children deferred assurances etc.


5) Money Back Policy -


     In money back policy,  money is paid to the insured a number of separate cash payments.  Insurer gives periodic payments of Survival benefit at fixed intervals during the term of policy as long as the policyholder is alive. These policies are structured to provide sums required as anticipated expenses (marriage, education, etc) over a stipulated period of time. In Case of death, the full sum assured is payable to the insured.


6) Annuities and Pension -


      In an Annuity,  the insurer agrees to pay the insured stipulated sum of money periodically. Under this type of policy, the sum assured is payable not in one lump sum payment but in monthly, quarterly, half-yearly or yearly installments after assured attains a certain age. This policy is useful to those who want to have a regular income after the expiry of a certain period. for example after retirement.In Annuity plan, no medical check-up is required.And it is paid so long as the assured survive.The purpose of an annuity is to protect against risk as well as provide money in the form of pension at regular intervals.  



See also...


Marine Insurance: Meaning, Definition and Types of Marine Insurance 

Duties, Powers and Functions of Insurance Regulatory and Development Authority (IRDA) 

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