What is Life Insurance Policy – Life Insurance Meaning, Features, and Types

Understanding the true meaning of Life Insurance, its key features, the different types of life insurance policies, and how they benefit the policyholder

Life is the most unpredictable element that exists. While it may be planned (up to a certain extent), it cannot be completely foreseen or predicted. It unfolds itself as it happens, day after day. However, we cannot wait for life to unravel with each passing day and not prepare for the multiple uncertainties that it throws at us. This is where planning and preparation comes into play. Life Insurance is a vital part of this process. This blog aims to better understand life insurance meaning for a layperson and how it can benefit him/her in their everyday life. It also highlights the key features of a life insurance policy and the various types of policies that exist for policyholders.

Meaning of Life Insurance

Let us first begin by throwing light on what life insurance means in simple terms. As the name suggests, life insurance aims at insuring life as such – a life that is full of unforeseen, yet inevitable, events. Life insurance guards us against all these uncertainties. The biggest of them all is the unavoidable death. If it occurs to someone prematurely, it can result in a huge irreparable loss, creating a void – both emotional as well as financial.

Here is when life insurance, meaning a policy that financially covers the risk of premature death, comes into force. Simply put, in case of premature death of an individual who buys life insurance (called the policyholder), a substantial amount of money (called the death benefit) is paid out to the bereaved family as financial support in the absence of the primary breadwinner. Let us look at the detailed life insurance policy meaning in the next section.

What is a Life Insurance Policy?

We broadly understood the concept of life insurance above. Now let us delve deeper into what a life insurance policy means for an individual. A life insurance policy is essentially a legal contract signed between the insurance company or insurer and the person who buys the policy or the insured. The insurer promises to cover the financial loss in the event of the premature death of the insured at any point in time.

In addition to premature death, several life insurance policies also provide risk coverage to the insured up to their survival through the entire tenure of the plan. This means that upon the maturity of the policy, the insured is entitled to receive a maturity benefit (similar to a death benefit in case of premature death) from the insurer. To avail of these benefits, however, the insured would need to pay a premium at regular intervals to the insurer.

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Top 5 Features of Life Insurance

We learned what life insurance means. Now let us look at the key features of a life insurance policy below:

1. In life insurance, the policyholder and insured can mean the same or different. If a person buys insurance on their life, they are both the policyholder and the life insured. However, when they buy a life insurance plan for the life of their spouse or dependent child(ren), the person buying the policy becomes the policyholder and the spouse/child is known as the life insured.

2. The person covered under the life insurance policy is known as the life insured or life assured.

3. Each life insurance policy purchased comes with a specific time and level of risk coverage. The insured is given the choice to opt for the duration and the coverage level preferred.

4. A policyholder is the person who pays the premium to the insurer for receiving the benefits under the policy.

5. Most insurance companies offer different types of life insurance policies. Every policy offers unique benefits as well. The section below looks at the different types of life insurance plans.

Types of Life Insurance Policies

As stated earlier, different kinds of life insurance plans are offered to a policyholder or insured at the time of buying the plan. Let us look at them in detail here:

Summing Up

Life Insurance is no longer a luxury or privilege. It is an absolute must for every individual to help them bounce back from life’s uncertainties. Buy your life insurance plan today from PayBima where you will get a host of affordable options for you and your entire family.

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