A Life Insurance Policy is issued after the person who is proposed to be insured, enters into an agreement or legal contract with the insurance company. Basically, the contract specifies that if the insured is afflicted by a terminal illness or dies, the insurance company will pay a specified amount (called the sum insured) of money to him or his beneficiaries. The occurrences are called insured events. In return, the policy holder agrees to pay to the insurance company a pre-determined amount called premiums in installments or in a lump sum. All these details and the limitations of the insured events are spelled out in the contract.

People opt for insurance to cover their life because things do not go as per their planning. People do plan their life and future well enough, but one stray accident or mishap takes place and the entire planning goes haywire. How would the family meet the expenses of food, clothing and housing if the breadwinner dies? People have realized the need and importance to protect their families after their death; or to set some amount aside for emergencies and as additional income to tide over their old age.

A Life Insurance Policy has two types of plans – protection and investment. There are different types of life coverage available for the consumer. Some of them are:

• Whole Life Policy: It gives coverage against death. In this plan, the insured keeps paying the installments regularly till his death, after which the sum insured is paid to the beneficiaries.
• Endowment Policy: The sum assured is paid to the insured person even after he survives the term. It is also a type of saving where the holder, if he is alive at the end of the term, gets back the sum assured along with bonus.
• Money Back Policy: In this type of life insurance policy, a part of the sum assured is paid at regular intervals. On survival, the remainder of the sum is paid along with bonus and other benefits. In case of death of the policy holder, the entire sum assured is paid to the nominee or beneficiary named by the insured.