Insurance Companies and Pension Plans Chapter III

Life Insurance In life insurance contracts, the payments to the policyholder depend-at least to some extent-on when the policyholder dies. Life insurance is a contract where the event being insured may never happen. Life assurance is a contract where the event being insured is certain to happen in the future.

Term Life Insurance Term (temporary) life insurance lasts a predetermined number of years. Insurance company makes a payment equal to the face amount of the policy to the specified beneficiaries if the policyholder dies during the life of the policy.

Term Life Insurance If the policyholder doesn’t die during the life of the policy, no payments are made. The policyholder is required to make regular monthly or annual premium payments for the life of the policy or until the policyholder dies (whichever earlier).

Term Life Insurance The face amount typically stays the same or declines with the passage of time. The premium payments typically stay or increase with the passage of time. A common reason for term life insurance is mortgage.

Whole Life Insurance Whole (permanent) life insurance provides protection over the whole life of the policyholder. The policyholder is required to make regular monthly or annual premium payments until death. The face value is paid to the designated beneficiaries.

Group Life Insurance It covers many people under a single policy. Usually this type of insurance is purchased by a company for its employees. It could be contributory where premiums are shared by the employer and employee, or noncontributory where the employer pays the whole cost.