Life insurance (or commonly life assurance, especially in the) is a contract between an insuredand an, where the insurer promises to pay a designated a sum of money (the “benefits”) in exchange for a premium, upon the death of the insured person. Depending on the contract, other events such as or may also trigger payment. The policy holder typically pays a premium, either regularly or as a lump sum. Other expenses (such as funeral expenses) are also sometimes included in the benefits.
Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot, and civil commotion.
Life-based contracts tend to fall into two major categories:
- Protection policies – designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.
- policies – where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US) are whole life, , and policies.