Life insurance is a contract that pledges payment of an amount to the person assured on the happening of an unforeseen event. In the event of the death of a person, the sum assured goes to the nominee. Life insurance is civilisation's partial solution to the problems caused by death.

Let's look at some insurance related terms that you would hear and use often:

- Life insurance: This is defined as "a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against."

- Policy: The terms and conditions of different plans offered by insurance companies are laid in a contract, known as a policy.

- Insurance premium: Insurance Premium is the payment made by a policy holder to the insurance company on a regular time span, usually till the policy matures, to accept the risk.

- Insurer and Insured: The party who seeks protection is called the insured and the insurance company is the insurer.

- Beneficiary: Is the person named in the policy, entitled to receive the benefit in the event of death of the insured person.

Having looked at the terms associated with the life insurance policy let's look at some of the benefits this insurance policy offers. The policy offers many advantages, such as it:

- Provides security for your family

- Provides a financial cover deriving a large sum later that provides retirement benefits, helps in children education and their marriage, and helps in buying or building a home

- Encourages regular savings pattern

- Provides rebate in income tax

- Allows individuals to avail loans against the accumulated premiums

- Protects your home mortgage

- Takes care of your estate planning needs

Term insurance is another life insurance that you may hear about. Also known as temporary insurance, term insurance is an inexpensive life insurance that provides the life coverage for a limited period of time. If the insured person dies within the period of the policy, the beneficiary is entitled to the insured amount. However, if the person survives the policy period, no benefits are accrued. After the set tenure, the insured can either leave the policy or pay increasing amount of premiums yearly to continue the coverage. Term insurance is often the most inexpensive way to purchase a substantial death benefit on a coverage amount.

This insurance is suitable for those who expect to earn high incomes for short period of time. The examples include anyone whose income depends on popularity such as artists, film stars, singers, and dancers.

The cost of this insurance is the cheapest among several other insurance and therefore, even the families with limited income benefit from this insurance. For instance, when a family buys a house on cash and credit basis, they must go for the term insurance to secure themselves against any unexpected events. Since the family has to pay back the amount within a certain number of years, the father can take the term insurance to the value of the indebtedness for that period. In this case, if the father dies, the family will not lose the ownership of the house.