• It provides protection to the family members or dependents against untimely death of an insured person.


• It facilitates savings for old age to enjoy secured and peaceful life as the earning capacity of a person is reduced after retirement.


• It encourages people to save money by making them obliged to pay premium regularly when a life policy is taken.


• It helps to mobilise savings of the public to channelise it for investment and thus promote economic development of the country.


• It (policy) can be used as a security to raise loans and thus improves credit worthiness of an individual or a business.


• It also has tax benefits as under Income Tax Act, premium paid is allowed as a deduction from the total income.

Types of Life Insurance Policies

• Whole life policy:- the premium on this policy is payable throughout the lifetime of the life assured. The sum assured becomes payable only on the death of insured.


• Endowment policy:- this policy is taken for a specific period known as 'endowment period'. The sum assured is payable either on the death of life assured or on the expiry of a fixed period. If the person does not die upto the maturity of the policy, he shall get back the insured amount after the maturity of life policy. It is the most popular form of life insurance.


• Joint life policy:- In this policy, husband and wife or the partners of a business can have a joint policy. The sum assured is payable at the end of the endowment term or on the first death of any one of the lives assured, which ever is earlier. Such policies are usually taken by partnership firms.


• Annuity policy:- In this policy, the amount is payable by the insurer not in one lump-sum but by monthly, quarterly, half-yearly or annual installments which are paid either until death or for a specified number of years. This type of policy is very useful to those persons who desire to provide a regular income for themselves and their dependents after the expiry of a specific period.


• Sinking fund policy:- this policy is mostly taken by firms and companies to accumulate funds to pay off a liability or for making a provision for the replacement of an asset after a period of time.


• Group insurance policy:- this policy may be taken out for the protection of lives of all employees in a business concern. Dependants of the employees are entitled to the benefits of these insurances.

Life insurance is not covered under the provisions of double insurance as life insurance is not a contract of indemnity.

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