Life insurance is a policy bought by the insured from the insurer. The policy essentially promises to pay the beneficiary named by the insured in the event of the death of the insured. On some occasions, the life insurance policy may cover critical illness or any major disability.

Life insurance polices can be of various types:

• Term insurance: Term insurance is a type of life insurance which covers the insured for a specific time  period. An example could be 25 or 30 years. The insured keeps paying an annual premium till the end of the term insurance period. If the insured survives the term insurance period, the insurer does not pay anything.
• Endowment: An endowment policy covers the insured for the entire life. It is a mix of insurance and investment. In these types of polices, the insurer pays a lump sum amount at the end of the policy duration.
• Pension: The pension type of life insurance is more of an investment policy, allowing the insured to build up corpus post his/her retirement. In event of survival, the insurer will pay a lump sum amount at the end of policy, and thereafter pay a monthly/annual amount till the survival period.