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EORUPA ACADEMY

Q. No. 27 (c): Define Life Insurance? Discuss in brief various types of Life Insurance.

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INTRODUCTION: Life insurance is a contract whereby the insurer promises to pay, in exchange for a certain premium, the sum insured, on the completion of a definite period or on the death of the insured himself or to his nominee as the case may be. DEFINITION: The definitions are as follows: Life insurance is defined as a contract where by the insurer in consideration of a premium paid in lump sum or in periodic installments undertakes to pay a specified sum either on the death of the insured or on the expiry of specified number of years in the policy. M. R Green: Life insurance is a plan under which large groups of individual can equalize the burden of loss from the death by disturbing funds to the beneficiaries of those who die. F. R. Perry: Life insurance is a contract by which the assure undertakes to pay the person of whose benefit the cover is effected or to his personal representative a certain sum of money on the happening of a given event or on the death of person whose life is assured. PRINCIPLES OR ESSENTIALS OF LIFE INSURANCE: The essentials or principles of life insurance are as follows: Insurable Interest: Life insurance must be supposed an insurable interest for the validity of its contracts. Insurable interest must be present in life insurance. When the life insurance policy is taken e.g. a husband has interest on his wife and on the other hand wife has insurable interest on his husband. Absolute Good Faith: This principle is applied in the life insurance policy. Both parties should disclose every fact before each other. The insured should provide the correct information regarding his death. It is personal contract between the insurer and insured. Fraud or Misrepresentation: The person desirous of getting a life policy should not conceal any fact about his age, profession, disease etc. both the parties involved in the contract should be honest in their dealings. Principles of Indemnity: The life insurance and most health insurance contract are subject to the principles of indemnity. Proof of Death: The person who has insurable interest must provide adequate evidence of death of insured person to insurance company. Death due to War or aviation accident: If the insured person dies in a war or in a certain aviation accident which are excluded perils in life insurance contact, the insurer will not pay the claim.

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Prepared By: H.ABDUL REHMAN

0321-6485593

EORUPA ACADEMY
KINDS OF LIFE INSURANCE POLICY: 1) Whole Life Policy: The whole life policy runs for the whole terms of life of the insured. Te insured pay premium throughout his life time. It is paid to the beneficiary when the insured dies. 2) Group Life Policy: The purpose of group life insurance is to cover the employees of a business concern. Group life insurance is usually written on or one year renewable term plan. 3) Endowment Life Insurance: The endowment policy has become very popular provides for the sum, insured to be paid whether at death ore after a fixed number of years whichever comes first. Endowment policy is suitable for the family man. In the event of his premature death his dependents are provided for, if he survives the term, the policy money will be available foe him to use as he wishes. Endowment policy has two kinds. a) Unprofitable Policy: According to unprofitable policy and insured amount will be paid without profit. b) Profitable Policy: According to profitable policy insurance company also pays profit with the insured amount if premium is high. 4) Term Life Policy: Term policy as the name signifies is an insurance policy for a specified period f time. If the assured person dies before a certain date or age. The insurance company will pay the face value of the policy to the beneficiary. Term policy can be compared to a fire or marine policy, which gives insurance coverage within the time limit of the policy. If a provision is made in the terms of the policy, the term policy can also be converted into the whole life or endowment policy. 5) Joint Life Policy: The policy covers the lives of two persons e.g. husband and wife o two partners in a business. If anyone of the person or partner dies, the claim will be paid to the other person. This policy helps to save the family or other partner from the financial worries at least of a certain period. 6) Annuity Insurance: In this type of insurance, the insured pays premium over a number of years or in lump sum to the insurer. The insurance company then promises to make a regular series of payment, usually monthly for the entire life of the insured. The annuity insurance is popular with the people having no dependent. 7) Children Deferred Insurance: This contract between the insurer and the insured provides insurance coverage to the children who need protection. A father, for instance, gives insurance coverage to his children up to the completion of studies or marriage. 8) Childrens Educational Policy: Parents may insure the lives of their children with the object of providing funds for school, college or university fees. 9) Accident Insurance: According to accident insurance, insurance company pays the insured amount in case of accident death. In case of injury and disability insured person is paid according to the condition of contract.

Prepared By: H.ABDUL REHMAN

0321-6485593