What is Life Insurance Policy ?
Life Insurance policy provides death risk cover to the insured person for a specified period. In case the life assured passes away during the policy period, the life insurance company pays the death benefit to the registered nominee under the policy contract.
Life Insurance policy is a legal contract between the Insurance Company and its customer, either insured or proposer.
Life Insurance Policy mainly frames in 3 major terms.
- Insurance Premium
- Life Insurance Cover i.e. Sum Assured
- Policy Term
How Life Insurance Policy Works ?
Any person who is availing Life insurance policy needs to pay premium i.e. the cost of policy benefits. The premium is calculated on the basis of age of the insured, policy term and insurance cover i.e. sum assured. In case any misappropriation happens with the life of that person, the insured company pays a lump sum amount of sum assured to the nominee of the life to be assured i.e. called Death Claim.
Various types of Life Insurance Policies-
There are various types of Life Insurance Policies. The objective of each policy is different but the main objective is to provide life cover to insured person under the policy-
Pure Term Plan– This is the pure risk cover policy. This type of policy provides high amount of sum assured at a very lower cost of premium. Early to avail term plan costs lesser to the insured person. Once term of policy gets over the life cover ends under the policy. If any mishappens with the life of insured this policy pays the amount of sum assured to its nominee. In recent time return of premium policies under this category are very popular that assured the refund of paid premium on completion of policy term.
Unit Linked Insurance Plans (ULIP)– This type of policy offers the investment option along with the insurance cover. Investment option under this policy is normally in the share market linked fund that fetches variable returns according to share market performance.
Endowment Plans– This policy provides fixed and guaranteed returns on its investments after the certain tenor. It is very old types of insurance products and very well known for its fixed maturities.
Money Back Policy– Normally the maturity under any life insurance policy effects at the completion of policy term. But money back policies offer the returns on its investments at certain periodical intervals during the policy term. One should not wait to get the part of maturity till the end of policy term. This is also a well-known and old type of life insurance policies.
