Life Insurance

Life Insurance

Life insurance typically provides a cash sum on the death of an individual (i.e. the insured person) or on him/her becoming incapacitated in consequence of an injury or sickness. Some of the major types of life insurance are summarized as follows:

Term Life 

A "Term Life" policy pays a lump sum (also called "death benefit") only upon the death of the policyholder/the insured person. It does not provide any dividends or savings, but pure protection against death. Term policies are of a fixed duration, for example 10 or 20 years. If no claim is made, the policy will expire at the end of the term.

Whole Life 

A "Whole Life" policy pays a lump sum upon the death of the policyholder/the insured person or at the termination of the policy. It usually covers a longer and unfixed duration (usually up to age of 100 of the policyholder/the insured person) as long as the premiums are paid. Premiums for a whole life policy are usually fixed based on the age of the insured person when the policy is issued and they do not increase as time passes. Unlike a term life policy which may expire without paying out, a whole life policy would always pay out eventually. Hence, the premiums for a whole life policy are typically much higher than those of a term life policy.  Some whole life polices (known as “participating policies” or “with-profits policies”) provide dividends to policyholders, for the insurance company will share its excess profits with the policyholders. Premiums for such participating policies are typically higher than those of non-participating policies

Endowment 

An "Endowment" policy pays out a lump sum after a specific term (usually 5, 10 or 20 years) or if earlier, upon the death of the policy holder / the insured person. It is designed to provide the policyholder savings for future living, as well as a life insurance protection.

Investment-linked assurance schemes 

An investment-linked assurance scheme (ILAS) is a life insurance policy issued by an insurance company which provides the policyholder with life insurance cover plus investment options (usually funds).  Its policy value is determined by reference to the performance of the “underlying or reference funds”. While the policyholders have the ownership of the life insurance policy, the underlying assets (normally the underlying or reference funds) are owned by the insurance company.