LIFE INSURANCE

Life insurance is a contract between the insurer and the insured,where insurer promises to pay a certain amount on the death of the insured in exchange of premiums.According to the contact amount can even be paid upon critical illness also. Premiums can be paid at one,annually ,half yearly,monthly or in any other suitable way according to the contract. Premiums can be calculated using following condition

PRESENT VALUE OF PREMIUMS=PRESENT VALUE OF SUM ASSURED +PRESENT VALUE OF EXPENSES

There are two categories of life insurance:

1. Protection policies-which serve to protect the insured by paying amounts on occurrence of certain events
2. Investment policies: which serve to promote investment by helping the single premiums or lump sum payments to grow.

Though the terms insurance and assurance are used interchangeably yet there is a small difference between the two.The term insurance is used for the events that might happen,like fire,flood etc, whereas the term assurance is used for the events that are certain to happen like death.

TYPES OF LIFE INSURANCE CONTRACTS

1. TERM INSURANCE-It is for a specified term. Sum assured is paid on death only if the person dies within that term.
2. WHOLE LIFE INSURANCE- It gives the coverage of whole life to the insured. Sum assured is paid on the death of the insured irrespective of the time of death.
3.  PURE ENDOWMENT INSURANCE- It is also for a specified term but the difference is that sum assured is paid only on survival till the end. No sum assured is paid on the death occurring within the term of the contact.
4. ENDOWMENT ASSURANCE CONTRACT- It is the mixture of both term and pure endowment. Sum assured is paid either on death or on survival of the insured for a specified period of time.
5. CRITICAL ILLNESS INSURANCE- It is a contract in which sum assured is paid only on occurrence of a critical disease. No sum assured s paid on the death.

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