What is Life Insurance
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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.
While there are single premium policies as well, the premium amount is usually paid on an annual basis, and there are options of paying half yearly, quarterly and monthly as well. The individual who buys the insurance is known as the policy holder.
Types of Life Insurance plans
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Pure Protection
These plans are called Term plans and provide the predefined amount of money to the policyholder’s family, if the policyholder dies during a specified term. No amount is paid if the insured person survives till the end of the policy period. This policy essentially remains active for a predefined time and is one of the most affordable policies available in the market, since the entire amount of premium is used to cover the life of the insured only.
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Protection and Savings
This kind of policy works like a financial tool that helps you plan for your long-term goals like purchasing a home, funding your children’s education, retirement and more, while offering the benefits of a Life Cover. In these kind of plans, part of the premium goes towards covering the risk of loss of life of the insured, while the other part of the premium goes towards accumulating a desired sum to meet the defined objectives.
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