Meaning of Life Insurance

• covers the “life-risk” of the insured person
• In case of death, the nominee will get the Insurance Policy amount

• In life insurance, the amount is payable on the happening of an event which is bound to occur i.e. death
• So this form of Insurance is also described as “Assurance”

• However, the life insurance policy also provides for payment of the policy value at maturity or by installments and an agreed bonus
• This payment may either be in lump sum on maturity of the policy or may be paid in installments called annuity

• Life Insurance relating to a contract regarding the life of any person under which he or his heir in the event of his death, will be paid a particular amount in case of the specified amount is paid in installment on the basis of his age.
• provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses

• often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity
• Annuities provide a stream of payments

• Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources
• In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance
• Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against
• Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed
• In many countries, such as the United States and the UK, the tax law provides that the interest on this cash value is not taxable under certain circumstances
• This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death.
• is generally not considered to be indemnity insurance, but rather "contingent" insurance (i.e., a claim arises on the occurrence of a specified event)
• The uses of the terms "insurance" and "assurance" are sometimes confused. "Insurance" refers to providing cover for an event that might happen (fire, theft, flood, etc.), while "Assurance" is the provision of cover for an event that is certain to happen like death and so Life insurance is actually Life Assurance

             Life Insurance can be further classified into 3 types:

1. Whole Life Assurance: In whole life assurance, policy amount is paid only on the death of Insured.
2. Term Assurance: Here the policy amount is paid in “lump-sum” on the maturity of the term of the Life Insurance Policy (say 20 years).
3. Annuity: On maturity of the policy, instead of a one-shot “lump-sum” payment the policy amount is disbursed in installments, generally monthly.