A life insurance policy is a contract between a policyholder and an insurance company. In a
life insurance policy, the insurance company promises to pay a sum of money to the loved ones of the policyholder in case of death of the
policyholder during a certain period. In return, the
policyholder pays a small amount as premium to the
insurance company.
In certain
types of policies, the policyholder can also opt for critical illness benefits or choose additional protection to cover against an unfortunate event due to an accident. Read more about these features and
types of life insurance policies below.
Life assured: The insured person is referred to as the life assured. In the unfortunate event of the life assured’s death, the nominee receives the insurance money. Life assured: The insured person is referred to as the life assured. In the unfortunate event of the life assured’s death, the nominee receives the insurance money.
Policy tenure: This is the duration for which the insurance company provides coverage. Policy tenure for a life insurance plan can range anywhere from 1 year to 99 years (whole life).
Maturity benefit: This is the money that the policy holder gets on surviving the policy term. a term life insurance policy does not have any maturity benefits, other life insurance plans offer this feature. Term Insurance Policy This is the simplest type of life insurance policy.
It pays your family a sum of money in case of your death, during the policy term. It does not pay anything if you survive the policy term. However the premiums on this type of policy tend to be low. For instance a monthly premium of just ₹ 1,057 can get you a life insurance cover of 1 crore rupees with regular income payout option (for a 30 year old, non-smoker) for 40 years(exclusive of taxes)
Unit Linked Life Insurance Policy (ULIP) This policy pays an amount on your death and a maturity amount if you survive the term. However unlike a traditional participating policy, the maturity amount is more dependent on your investment choices rather than the profits of the life insurance company. Your policy is invested in funds and divided into ‘units’ similar to those of a mutual fund. You typically get a lot of freedom to choose the type of fund your money will be invested in.
