In simple terminology, life insurance is a trust where money is pooled by a group of people to share the misfortune of a selected few.

In modern times, it represents an institution, which pools money from a large group of people in the form of premiums to take care of the not-so-fortunate ones. This money is invested in government securities and bonds and paid to the policyholder either on maturity or his nominees or assignee in case of his untimely demise.

Basically Life Insurance policies are classified in to two classes - the term policy and the pure endowment Policy. All other policies are admixture of these two policies in different proportions.

The term ‘policy’ is an insurance contract wherein the insurer agrees to pay (the legal heirs or assignee of the insured person), a sum assured on his/her death against a periodical payment of insurance premium. However, if the insured person survives till the end of the policy period, nothing is payable to him as per the insurance contract.

Pure Endowment Policy is an insurance contract, which is the exact opposite of the Term Policy. In this, the insurer agrees to pay a sum assured to the insured if he/she survives till the policy period against a periodical payment of insurance premium. However, if the insured person dies during this period, nothing will be payable to his legal heirs or nominee as per the insurance contract.

The various life insurance policies available with the present insurer can be broadly classified as follows-

• Term Policies- These are the cheapest policies where there is a life cover but no survival benefit. The claims in case of these policies are less, as normally the insured lives longer than the policy period. As such the premiums are lesser than the other policies.
• Whole Life Policies- As the name suggests, this policy is in force till the lifetime of the policyholder. The sum assured is payable to the nominee or heir of the insured on his expiry. As there is always a claim in case of this policy, the premium is more than the other policy.
• Endowment Policies- These are the best selling policies for the life insurance. These are combination of Term Policy and Pure Endowment Policy wherein the insured gets a dual benefit. If the policyholder expires during the policy period, his nominees/heir gets the sum assured immediately along with the accrued interest. However if the insured survives till the policy period, he gets the sum assured along with the bonus.
• Annuities- These are also called as pension policy. In this case, the policyholder pays the premium periodically or in lumpsum to get a regular pension starting from an age as agreed upon.

Policies like Education Policy, Marriage Policy, etc are all revised fixed term policies where the sum assured is paid to the assignee at the end of the tenure.

Money back policies are endowment policies where some part of the sum assured is paid back to the insured at regular intervals and the remaining amount is paid on the maturity along with the bonus. However if the policyholder expires during the policy period, the entire sum assured is paid to the nominee immediately along with the accrued bonus without deducting the periodic payments.

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