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Importance of Life Insurance in our lives

Saturday,09 October 2021 05:31 PM IST

Anupama Nair


What the pandemic of 2020 has taught me is that “Uncertainty is a part of our lives” and you need to think of Life Insurance as a way to lead our lives from darkness to light. As it is said

“Asathoma Sath Gamaya

Tamosama Jyothir Gamaya

Mrityoma Amritham Gamaya

Om Shanti Shanti Shanti hi”.

This saying is true when the world is held hostage by a ‘mere virus’ and never in my lifetime have I seen human beings so helpless, not knowing what to do. In such a time life insurance is a boon, a life saver. What is life insurance? Life insurance is mere “a contract between an insurance policy holder and an insurance company, where the insurer promises to pay a sum of money in exchange for a premium or payment, upon the death of an insured person or after a set period of time”. Why do you need life insurance? I would say you need life insurance to ensure that your immediate family has some financial support in the event of your death, to finance your children’s education and other needs, to have a savings plan for the future so that you have a constant source of income after retirement, to ensure that you have extra income when your earnings are reduced due to serious illness or accident and lastly to provide for other financial contingencies and lifestyle requirements.

Life insurance in other words is a financial cover for any contingency linked with human life -- death, disability, accident, retirement, etc. A human’s life is subject to risks of death and disability due to natural and accidental causes. When human life is lost or a person is disabled permanently or temporarily, there is a loss of income to the family. Though we cannot value human life, a monetary sum could be determined based on the loss of income in future years. Hence, in life insurance, the sum assured is really a ‘benefit’.  Life insurance products provide a definite amount of money in case the life insured dies during the term of the policy or becomes disabled on account of an accident.

I am going to write about some common terms in life insurance vocabulary. They are:

  • Life Assured is the person who is covered under the insurance policy.
  • A proposer is a person who pays the premiums of the policy. “If you have bought the policy for yourself, then you are both the life assured as well as the proposer but if you purchase a policy for a family member then you are the proposer and the family member is the Life Assured”.
  • The nominee or Beneficiary is the person you appoint at the time of buying the policy to receive the benefits of your insurance policy, in your absence.
  • The insurer is the insurance company that sells the policy.
  • Life Cover is the amount that the Insurer will pay to your Nominee in case of an unfortunate event like the death of the Life Assured.
  • Maturity Benefit is the lump sum the Life Assured gets on completion of the policy term. This amount is known as the Maturity Amount.
  • Premium is the amount you pay to the insurer for receiving the benefits of the insurance policy. These payments can be made on a regular basis throughout the policy duration, for a limited number of years, or just once, as per the options available under the policy you choose.
  • Premium Payment Term is the number of years for which you pay the premiums.
  • Policy Term is the number of years for which the Life Cover continues.


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