Definition and meaning of Life Insurance – Life Insurance can be defined as a contract between an insurance policy holder and an insurance company, where the insurer promises to pay a sum of money in exchange for a premium, upon the death of an insured person or after a set period. Here, you pay premiums for a specific term and in return, we provide you with a Life Cover.
This Life Cover secures your loved ones’ future by paying a lump sum amount in case of an unfortunate event. In some policies, you are paid an amount called Maturity Benefit at the end of the policy term.
Types of Life Insurance
1) Term life insurance
Term life insurance or term assurance is life insurance that provides coverage at a fixed rate of payments for a limited period of time, the relevant term. Term life insurance or term assurance is life insurance that provides coverage at a fixed rate of payments for a limited period of time, the relevant term.
2) Whole life insurance
Whole life insurance, or whole of life assurance, sometimes called “straight life” or “ordinary life”, is a life insurance policy which is guaranteed to remain in force for the insured’s entire lifetime, provided required premiums are paid, or to the maturity date.
3) Universal life insurance
Universal life insurance is a type of cash value life insurance, sold primarily in the United States. Under the terms of the policy, the excess of premium payments above the current cost of insurance is credited to the cash value of the policy, which is credited each month with interest.
4) Variable universal life insurance
Variable universal life insurance is a type of life insurance that builds a cash value. In a VUL, the cash value can be invested in a wide variety of separate accounts, similar to mutual funds, and the choice of which of the available separate accounts to use is entirely up to the contract owner.
5) Endowment policy
An endowment plan is a life insurance plan that offers a life cover and helps you grow your money. It provides returns that are fixed at the time of the purchase of the policy. It can be used to save for various goals like buying a house, your child’s education or marriage, starting a new venture and more.
6) Unit-linked insurance plan
A unit-linked insurance plan is a product offered by insurance companies that, unlike a pure insurance policy, gives investors both insurance and investment under a single integrated plan.
7) Money-back policy
A money back insurance policy is a financial instrument that offers periodic payouts (known as survival benefits) at specified intervals, along with a payout in the event of the death of the policyholder (known as the sum assured). These survival benefits amount to a certain percentage of the sum assured.
8) Critical illness insurance
Critical illness insurance, otherwise known as critical illness cover or a dread disease policy, is an insurance product in which the insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the specific illnesses on a predetermined list as part of an insurance policy.
The policy may also be structured to pay out regular income and the payout may also be on the policyholder undergoing a surgical procedure, for example, having a heart bypass operation.
The policy may require the policyholder to survive a minimum number of days (the survival period) from when the illness was first diagnosed.
The survival period used varies from company to company, however, 14 days is the most typical survival period used. In the Australian market, survival periods are set between 8 – 14 days.
9) Group life insurance
Group life insurance is a type of term life insurance plan purchased by an employer or organization to cover an entire group of people. Often, this insurance is offered as an employment benefit or membership perk at little or no cost to insured individuals.
10) Pension
A pension is a fund into which a sum of money is added during an employee’s employment years and from which payments are drawn to support the person’s retirement from work in the form of periodic payments.
11) Accidental death and dismemberment insurance
In insurance, an accidental death and dismemberment policy provides financial benefits to the insured or their beneficiaries in the event of accidental death, serious injury, or dismemberment resulting from an accident.
12) Group insurance
Group Insurance covers a defined group of people, for example members of a professional association, or a society or employees of an organization. Group Insurance may offer life cover, health cover, and/or other types of personal insurance.
13) Survivorship life insurance
Survivorship life insurance insures two people and only pays out the death benefit after both have passed away. It’s often purchased by a couple as a means of leaving money to their children, estate planning, leaving a sizeable legacy, or funding a support system for a dependent who may require lifetime care.
Benefits Of Life Insurance
The many benefits of having life insurance
1) Income replacement for years of lost salary.
2) Paying off your home mortgage.
3) Paying off other debts, such as car loans, credit cards, and student loans.
4) Providing funds for your kids’ college education.
5) Helping with other obligations, such as care for aging parents.
Conclusion
So, we have now completed our journey of the learning Life Insurance. Hope you found this module Knowledgeable and Interesting. You might have been astonished to know that there are so many different type of life insurance policies available. However we have discussed each of them in a detailed manner. hope you will find them interesting as well.