What is 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. 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.\
There are two basic types of Life Insurance plans -
- Pure Protection
- Protection and Savings
What is Pure Protection Plan?
A Pure Protection plan is designed to secure your family’s future by providing a lump sum amount, in your absence.
What is Protection and Savings Plan?
A Protection and Savings plan is a financial planning tool which should be purely used for planning of Secured Retirement as it is a Govt. Secured tool with the benefits of Life or Death Cover to secure your family.
Let us understand some commonly used terms in Life Insurance:
- Life Assured: It is the person who is covered under the insurance policy
- Proposer: It is the person who pays the premiums of the policy. For example: If you have bought the policy for yourself, then you are both the Life Assured as well as the Proposer. Similarly, if you purchase an insurance policy for a family member, then you are the proposer and the family member is the Life Assured.
- Nominee or Beneficiary: It is the person you appoint at the time of buying the policy to receive the benefits of your insurance policy, in your absence.
- Insurer: The insurance company that sells the life insurance policy is called the Insurer (for example, ICICI Prudential Life Insurance).
- Life Cover: It is the amount that the Insurer will pay to your Nominee in case of an unfortunate event.
- Maturity Benefit: For Protection + Savings policies, the Insurer pays a certain lump sum of money on completion of the policy term. This amount is known as the Maturity Amount.
- Premium: A premium is the amount you pay to the insurer for receiving the benefits of the insurance policy. These payments can be made on a regular basis throughout the policy duration, for a limited number of years or just once, as per the options available under the policy you choose.
- Premium Payment Term: The number of years for which you pay the premiums is known as the Premium Payment Term.
- Policy Term: The number of years for which the Life Cover continues.