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 policyholder). Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policyholder typically pays a premium, either regularly or as one lump sum.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.
Investment policies – the main objective of these policies is to insure life and facilitate the growth of capital by regular or single premiums.Insurance Investments cater to every life stage of the individual, such as
1. For young families, a life insurance policy creates an 'instant estate' before they have enough time to accumulate other assets. And it provides liquidity to the named beneficiary (or beneficiaries) long before the deceased's estate matters (which often call for substantial expense) are settled.
2. Retirement Insurance policies are insurance which would provide benefits for proposer and his/her family while they are still living.
In the event of the life assured passing, life insurance provides money directly to the beneficiaries who have been nominated and the sum of money can be used for:
- Making up for your lost income
- Funding a child’s education
- Paying off household debt etc