Who is the insured under a life insurance policy?

Life insurance typically provides a cash sum on the death of an individual (i.e. the insured person) or on him/her becoming incapacitated in consequence of an injury or sickness. Some of the major types of life insurance are summarized as follows:


Term Life


A "Term Life" policy pays a lump sum (also called "death benefit") only upon the death of the policyholder/the insured person. It does not provide any dividends or savings, but pure protection against death. Term policies are of a fixed duration, for example 10 or 20 years. If no claim is made, the policy will expire at the end of the term.


Whole Life


A "Whole Life" policy pays a lump sum upon the death of the policyholder/the insured person or at the termination of the policy. It usually covers a longer and unfixed duration (usually up to age of 100 of the policyholder/the insured person) as long as the premiums are paid. Premiums for a whole life policy are usually fixed based on the age of the insured person when the policy is issued and they do not increase as time passes. Unlike a term life policy which may expire without paying out, a whole life policy would always pay out eventually. Hence, the premiums for a whole life policy are typically much higher than those of a term life policy.  Some whole life polices (known as “participating policies” or “with-profits policies”) provide dividends to policyholders, for the insurance company will share its excess profits with the policyholders. Premiums for such participating policies are typically higher than those of non-participating policies




An "Endowment" policy pays out a lump sum after a specific term (usually 5, 10 or 20 years) or if earlier, upon the death of the policy holder / the insured person. It is designed to provide the policyholder savings for future living, as well as a life insurance protection.




An annuity is typically used for retirement planning which helps policyholders accumulate savings for getting a steady income after retirement or over a long term in future. A policyholder pays premiums to an insurance company, who in turn provides the policyholder with a regular payment for a period specified in the contract after a designated period of time or when the policyholder reaches a certain age.


Qualifying Deferred Annuity Policy


A deferred annuity is one type of annuities. The policyholder pays premiums regularly over a period of time (i.e. the accumulation phase), in return he will receive regular income for a period of time in future (i.e. the annuitization phase).


To promote voluntary retirement savings, the Government of Hong Kong in 2019 introduced tax reliefs in respect to certain deferred annuities that are certified by the Insurance Authority as Qualifying Deferred Annuity Policies (QDAP). The policyholder (as taxpayer) of a QDAP can claim for potential tax deductions on premiums paid up to HKD60,000 per tax assessment year.


Investment-linked assurance schemes


An investment-linked assurance scheme (ILAS) is a life insurance policy issued by an insurance company which provides the policyholder with life insurance cover plus investment options (usually funds).  Its policy value is determined by reference to the performance of the “underlying or reference funds”. While the policyholders have the ownership of the life insurance policy, the underlying assets (normally the underlying or reference funds) are owned by the insurance company.


Mandatory Providential Fund Schemes (“MPF”)


Following the implementation of the MPF (an employment-based retirement protection system) on 1 December 2000 , both employers and employees should know more about their rights and obligations relating to MPF schemes.

Ask most people what life insurance is, and they’ll tell you it’s a policy you buy that pays money to your family if you pass away. Ask them to explain key policy features, the different kinds of policies available, how they work – and they’ll probably try to change the subject.

But if you’re looking for life insurance those things are important. This article will help answer your questions – specifically: 

Each life insurance policy is different, and each state’s laws regulating insurance policies are different. Before purchasing a life insurance policy, you should consult with a life insurance professional. It may also be a good idea to consult with your legal or tax advisor. The information provided below is general guidance only and should not be relied on in connection with any specific policy.

What is a life insurance policy, and what are its key features? 

A life insurance policy is an agreement between an insurance company and a person (or legal entity). Each life insurance policy is different, and each state’s laws regulating insurance policies are different. In general, most insurance policies identify the following:

  • The insurer: Only certain companies can provide life insurance, and these companies are regulated by state insurance departments.
  • The policyholder: The person or entity (such as a family trust or a business) which owns (or “holds”) the policy. The policy can insure the holder, or it can insure another person.
  • The insured: The person whose life is insured.
  • The death benefit: The amount the insurer will pay when the insured passes away.1
  • The beneficiaries: The people or entities that will receive the death benefit. It can all go to a single person (e.g., a surviving spouse) or it can be divided by percentage among many different people and entities (e.g., three children could each get 30% and 10% could go to a charity).
  • The policy length: The time period that the insurer agrees to pay a death benefit. This can be a specific term (e.g., 10 or 20 years) or it can be permanent – a policy that lasts for the life of the insured for as long as premiums are paid.
  • The premium: The monthly or yearly payments needed to keep the policy in effect.
  • The cash value: Permanent life policies, like whole life insurance, have a cash value component that builds over time2 and can be cashed out or borrowed against.3 A term policy has no cash value.

What are the different kinds of life insurance policies and how do they work?

There are two basic types of life insurance: Term and permanent life insurance. A term life insurance policy provides coverage for a specific period of time, typically between 10 and 30 years. It is sometimes called “pure life insurance” because unlike the permanent policy or whole life insurance, there’s no cash value component to the policy – once the term is over, there’s nothing left.

Permanent life insurance provides coverage that lasts your entire life.4 Unlike term, it’s not a “pure life insurance” product because it includes a cash value component which helps make coverage last while the insured is alive and premiums are paid, and while providing other financial benefits. A portion of your premium dollars grows tax-deferred5 over time – but the entire death benefit is immediately payable from the first day you have the policy. The cash value on the other hand, may take some years to build up to a significant amount.6

There are two main types of permanent insurance: whole and universal life. Whole life insurance is simpler – the premium remains the same for life, the death benefit is guaranteed, and the cash value grows at a guaranteed rate. Universal life insurance can be less expensive, but the premiums, death benefit, and cash value growth rate can vary, making the policy more complex.7 

The following chart highlights the key differences between the three types of polices.

Term life, whole life, and universal life compared

 Term life insuranceWhole life insuranceUniversal life insuranceCoverage periodLimited to a specific term (typically 10-30 years)Permanent lifetime protectionPermanent lifetime protection8Builds cash valueNoYesYesCost for a given death benefit9Less expensive than whole or universalMore expensive than termMore expensive than termPremiumsCan varyTypically fixedCan varyTax-free death benefit10Yes, typicallyYes, typicallyYes, typicallyPrimary usesDeath benefit income protection and replacementDeath benefit income protection; tax-deferred asset accumulation; tax-advantaged wealth preservation and transferDeath benefit income protection; tax-advantaged wealth preservation and transfer


What benefits do people get from life insurance at different stages in life? 

Life insurance can be a powerful tool for protecting your financial confidence – and especially the financial confidence of the people who depend on you – so most adults should consider it. However, before you get a policy you should ask yourself: what type of financial protection do you need at this point in your life?

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Now that you know what it is, how do you get a policy that works for your needs?

There’s one more thing you should know about life insurance: the longer you wait to buy it, the more expensive it typically gets. Don’t put things off. If you can purchase life insurance through your employer, that’s a great place to start. You can get a basic level of coverage at very attractive group rates – but don’t assume it’s enough.

Life insurance is one of the most consequential financial purchases you can make – and it’s worth taking the time to look into all your options in order to get the coverage that best fits your needs. If you have a financial representative you trust, talk to them about your needs. If not, Guardian can connect you with a financial representative who will listen to your needs, tell you about the best ways to meet those needs within your budget, then help you decide. You can also get an online quote using our term life insurance calculator.

If you are an employee, taking advantage of your benefits at work can be a smart and affordable way to get the financial protection you want for yourself and your family. Contact your HR department to review your benefit details and determine how much life insurance is available to you. Your employer may provide life insurance as a benefit, or you may opt to pay for additional life insurance through payroll deductions.

Learn more about how to buy life insurance.

Frequently asked questions about life insurance 

What does life insurance cost?

The cost of a policy – for a given level of death benefit – can vary greatly depending on the type of policy (i.e., term or permanent) and all the variables that can affect your life expectancy – age, weight, health, gender, lifestyle, occupation, and risk factors such as smoking.

How can a life insurance policy be tailored to my needs?

Almost all life insurance policies have optional features called riders that can provide valuable added benefits that tailor the policy to your needs.10 For example, Guardian has riders that can help protect family assets by paying for chronic care and end-of-life needs while the insured is still alive.

Can I buy a policy that lets me increase my coverage later on?

Yes, certain permanent life insurance policies have a benefit increase rider that allow you to increase the death benefit at certain intervals (e.g., every three years) without a new medical exam or evidence of insurability.

Is the insured the policyholder?

Yes, the policyholder is the same as the named insured. The named insured is another way of saying policyholder.

What is the difference between policy owner and insured?

The Life Insured is the person whose life is covered. If this person dies, or suffers anything else that qualifies for a claim such as a terminal illness, a claim will be paid. The Policy Owner is the person who receives the money from the claim. The Policy Owner may be the same person as the Life Insured.

Is the owner of a life insurance policy the beneficiary?

That is, the insured party should not be the owner of the policy, but rather, the beneficiary should purchase and own the policy. If your beneficiary (such as your spouse or children) purchases the policy and pays the premiums, the death benefit should not be included in your federal estate.

What is a life insurance person called?

Agent - An insurance company representative licensed by the state who solicits and negotiates contracts of insurance, and provides service to the policyholder for the insurer.