Life insurance definition:
Life insurance is a contract between a policyholder and an insurer in which the insurer guarantees payment of a sum of money to the beneficiaries in exchange for a premium amount upon the death of the insured person.
Life insurance meaning in simple terms:
Life insurance is a contract under which a person pays a premium amount to an insurance company and the company in returns pays a lump-sum amount to the beneficiaries upon the insured’s death.
Who needs Life Insurance?
People often have a query about who actually needs life insurance. Generally, people who have dependents need life insurance. A dependent is the one who is financially dependent on you. It can be your children, spouse, siblings or ageing parents.
Life insurance is for young and working people whose income adds value to the family and supports them. In case of their death, the amount is paid to their dependents so that the amount can replace their salary for some years.
Life Insurance Benefits:
- It provides risk coverage to the insured family in terms of monetary compensation in return of premium amount.
- Some life insurance policy cover hospitalisation expenses and critical illness treatment.
- Some insurance policies invest your money in profitable ventures, thus helps in wealth creation.
- It guarantees an assured sum of money which is payable on the happening of the unfortunate event.
- The insurance premium is tax deductible.
Life insurance types:
- Term insurance plan
- Endowment policy
- Money back policy
- Unit-linked insurance plan
- Whole life policy
- Pension plan