Life Insurance - Meaning
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. Here, at ICICI Prudential Life Insurance, you pay premiums for a specific term and in return, we provide you with a Life Cover. 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 -
- 1. Pure Protection
- 2. 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 tool that helps you plan for your long-term goals like purchasing a home, funding your children’s education, and more, while offering the benefits of a Life Cover.
Click here to know more about different types of Life Insurance Plans.
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.
Now, let’s see an example:
Mr. Kumar (Life Assured) pays ICICI Prudential Life Insurance (Insurer) an annual amount (Premium) over 5 years (Premium Payment Term) to make sure that his wife (Nominee) gets a certain assured sum of money (Life Cover) in case of an unfortunate event during the 10 years or Lumpsum amount at maturity on survival at the end of policy term.
Life insurance not only covers the risk arising due to an unfortunate event, but also gives you additional benefits like tax benefits, savings and wealth creation over a period of time. The right life insurance plan from a trusted company can help one get long-term risk cover plus savings, i.e. dual benefits from one solution.