Note on Life Insurance

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Life Insurance
Life Insurance

Life insurance is one of the common forms of insurance that comprises 80 percent of the total insurance business done in the world. It was started in England and other European countries in the 16th century. The life insurance in modern lines was developed in the 18th century.

Life insurance is the contract between policy holder and the insurance company where insurance company undertakes the risk of compensation of insured sum either at the majurity period or after the death of insured to the nominee. It is also known as a contingent contract because the loss of the life cannot be compensated, but the financial compensation is provided to the nominee for the loss of insured life.

The following are the main definitions of life insurance: -

“Life insurance contract may be defined as the contract where by the insurer in the consideration of a premium undertakes to pay a certain sum of money either on a death of the insured or on the expiry of the fixed period.” – M. N. Mishra

“The life insurance contract embodies an agreement, in which, broadly stated the insurer undertakes to pay a stipulated sum upon the death of the insured, or at some designated time to designated beneficiary.” – John H. Maggee

Types of life insurance

  1. Whole life insurance
    Whole Life Insurance
    Whole Life Insurance
    The insurance which is done for the whole life of human being is known as whole life insurance. Under this policy, the insured should pay the premium regularly throughout the life and the insurer pays the sum assured only to the nominee or dependent of insured after his/her death. The main aim of whole life insurance is to provide financial protection to the member of the family after one’s death.
  2. Endowment life insurance
    The life insurance which is done for fixed period such as 15, 20, 25 years etc. is called endowment life insurance. Under this type of life insurance, the insured should pay the premium amount up to the specified period and sum assured is paid by the insurer on either maturity or his/her death whichever is earlier.
  3. Anticipated endowment life insurance
    It is just like endowment life insurance because it is also done for fixed period of time i.e. 15, 20 or 25 years. But in this policy, the sum assured is paid to the concerned party in installment basis at certain intervals during the endowment period. On the basis of a contract period, a part of the sum assured is paid at certain intervals and the remaining is paid after the maturity.
  4. Children’s education and marriage endowment life insurance
    It is a type of life insurance in which the amount of premium will be paid for a certain period to manage the fund for the further education and marriage of a child. Under this policy, the parent should pay the insurance premium regularly up to the fixed period as agreed and the child’s name is kept as his/her representative. The insurer agrees to pay the amount insured when the child attains certain age or period in expired which can be used for children’s education and marriage. If the child dies before the maturity of the policy, no premium is payable to the insurer. The other terms and condition are applied like in endowment life insurance.
  5. Term life insurance
    Term Life Insurance
    Term Life Insurance

    It is the insurance policy purchased by a debtor for a short period to ensure the repayment of a loan to the creditor. It is done for a short period to provide protection against the debt taken in case of the death of debtor before payment of the debtor. However, the insurance company should not pay any amount in case of survival of insured till the maturity of the period. An amount of insurance premium under this insurance will be nominal.
  6. Single life insurance
    Under single life insurance policy, only one individual is insured. The premium is paid for the life insurance of the single policy-holder.
  7. Joint life insurance
    Joint Life Insurance
    Joint Life Insurance

    Under joint life insurance, the insurance policy is taken for two or more person's lives. In this policy, the sum assured is payable to the survivor on the death of any person insured or to the survivors on the expiry of the policy whichever is earlier. Generally, this policy is taken by husband and wife jointly and partners of a firm.

  • Life insurance is one of the common forms of insurance. 
  • Life insurance is the contract in which the insured agrees to pay the premium to the insurer against which the insurer promises to compensate the insured a sum of money on the happening of an event.
  • The insurance which is done for the whole life of human being is known as whole life insurance.
  • The life insurance which is done for fixed period such as 15, 20, 25 years etc. is called endowment life insurance. 
  • Under joint life insurance, the insurance policy is taken for two or more persons’ lives.
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Very Short Questions

Term life insurance is the insurance policy purchased by a debtor for a short period to ensure the repayment of a loan to the creditor. It is done for a short period to provide protection against the debt taken in case of death of debtor before payment of the debtor.

Children's education and marriage endowment life insurance is a type of life insurance in which the amount of premium will be paid for a certain period to manage the fund for the further education and marriage of a child. Under this policy, the parent should pay the insurance premium regularly up to the fixed period as agreed and the child’s name is kept as his/her representative. The insurer agrees to pay the amount insured when the child attains certain age or period in expired which can be used for children’s education and marriage. If the child dies before the maturity of the policy, no premium is payable to the insurer. The other terms and condition are applied like in endowment life insurance.

Term life insurance is the insurance policy purchased by a debtor for a short period to ensure the repayment of a loan to the creditor. It is done for a short period to provide protection against the debt taken in case of death of debtor before payment of the debtor. However, the insurance company should not pay any amount in case of survival of insured till the maturity of the period. An amount of insurance premium under this insurance will be nominal.

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  • Life insurance was started in England and other European countries in the ______ century.

    16th
    18th
    21st
    13th
  • The life insurance in modern lines was developed in the ______ century.

    18th
    16th
    13th
    22nd
  • Life insurance is also known as ______.

    anticipated contract
    foreseeable agreement
    predicatble contract
    contingent contract
  • "Life insurance contract may be defined as the contract whereby the insurer in the consideration of a premium undertakes to pay a certain sum of money either on a death of the insured or on the expiry of the fixed period." Who gave this definition?

    B.M. Shrestha


    A.N. Agrawala


    M. N. Mishra


    G.D. Pandey


  • The insurance which is done for the whole life of human being is known as ______.

    whole life insurance


    joint life insurance


    term life insurance


    anticipated endowment life insurance


  • The insurance policy purchased by a debtor for a short period to ensure the repayment of a loan to the creditor is called ______.

    term life insurance
    anticipated endowment life insurance
    joint life insurance
    whole life insurance
  • The life insurance which is done for fixed period such as 15, 20, 25 years etc. is called ______.

    whole life insurance


    endowment life insurance


    joint life insurance


    term life insurance


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