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In term insurance, life assured refers to the individual whose life is covered by the insurance policy. If this individual passes away during the policy term, the insurer will pay the sum assured (the death benefit) to the nominee or beneficiaries. The purpose of covering the life assured is to provide financial protection to their dependents in case of their untimely demise.
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Imagine Rajesh, a 40-year-old father, who buys a term insurance policy to protect his family. In this case, Rajesh is the life assured, meaning the policy is based on his life. If he passes away during the policy term, the insurer pays the death benefit to his family. This ensures his loved ones can cover expenses and manage financially in his absence. The life assured is the person whose life is insured, and their passing triggers the payout.
Term Plans
Main Person Covered Under the Policy:
The life assured is the person whose life is being covered under the term insurance policy. If this individual passes away during the policy term, the insurer pays a death benefit to the nominee. For example, if a father is life assured, his family will receive the policy’s payout if he dies during the policy tenure.
Death Benefit:
The death benefit is the primary benefit of term insurance. It is the amount paid by the insurance company to the nominee if the life assured passes away during the policy period. This benefit is designed to provide financial security to the life assured’s family in their absence.
Difference Between Life Assured and Policyholder:
In most cases, the life assured and policyholder are the same person. However, there can be instances where they differ. For example, in a term insurance plan purchased by a spouse for their partner, the policyholder is the person who pays the premium and owns the policy, while the life assured is the individual whose life is covered. If the life assured passes away, the death benefit is paid out to the nominee, not necessarily the policyholder.
Nominee Assignment:
While the life assured is the individual whose life is covered under the benefits of term insurance, they can appoint a nominee. The nominee is the person (typically a family member or legal heir) who receives the death benefit if the life assured passes away during the policy term.
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Let’s understand the role of the life assured with the help of an example:
Rahul, a 35-year-old individual, purchases a 1 crore term insurance policy with a sum assured of ₹1 crore for a period of 30 years. In this case, Rahul is the life assured. If Rahul passes away during the policy period (before he turns 65), the insurer will pay ₹1 crore to the nominee he has appointed, likely his spouse or children.
In a term or life insurance policy, typically the person taking the policy is the life assured. However, most insurers allow the option of buying a policy for your loved ones, like:
Spouse: A husband may take out a policy on his wife’s life or vice versa. In such a case, the spouse becomes the life assured.
Parents and Children: Policies can also be taken by children on behalf of their aging parents or for their own future protection, with the parent or child as the life assured.
Business Partners: In some instances, business partners may take term insurance for each other, ensuring financial security for the business in case of one partner’s death.
Financial Security for Dependents:
The life assured typically has dependents—family members, such as a spouse, children, or parents—who rely on their income. Term insurance ensures that if the life assured passes away, the dependents are financially supported, helping them manage expenses, debts, and future goals like education and marriage.
Affordable Premiums:
Term insurance offers large sum assured at an affordable premium, providing peace of mind to the life assured that their family will be financially stable in case of their death during the policy term.
Nomination:
The life assured can nominate one or more individuals who will receive the death benefit in case of their demise. This ensures that the payout reaches the right people, safeguarding the financial future of their loved ones.
No Maturity Benefit:
Term insurance is a pure risk protection plan, meaning it does not offer any maturity benefit if the life assured survives the policy term. The purpose of the policy is solely to protect against the financial loss caused by the death of the life assured.
In term insurance, the life assured is the person whose life is covered under the policy, and their role is critical to the structure and purpose of the plan. The insurance provides financial protection to the dependents of the life assured, ensuring that their needs are met even in the unfortunate event of their death. By understanding the responsibilities and the importance of the life assured, policyholders can make informed decisions about the amount of coverage, the nomination of beneficiaries, and the inclusion of additional riders. Term insurance thus plays a vital role in securing the future of the family, offering peace of mind to the life assured and their loved ones.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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