Life insurance (or life assurance, especially in the Commonwealth), is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money (the benefit) in exchange for a premium, upon the death of an insured person (often the policy holder). Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. Furthermore, the policy holder typically pays a premium, either regularly or as one lump sum. In addition, other expenses (such as funeral expenses) can also be included in the benefits.
Life policies are also legal contracts and the terms of the contract also describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot, and civil commotion.
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Life-based contracts tend to fall into two major categories:
- Protection policies – These are also designed to provide a benefit, typically a lump sum payment, in the event of a specified event. Another common form of a protection policy design is term insurance.
- Investment policies – The main objective is to facilitate the growth of capital by regular or single premiums. Furthermore, common forms (in the U.S. and in the Philippines) are whole life, universal life, and variable life policies.
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