Different types of life insurance policies

THE LIFE INSURANCE POLICIES ARE OF MANY TYPES. THE PRINCIPAL TYPES OF POLICIES ARE DISCUSSED BELOW:

(1) Whole life Policy :

Under this policy premiums are paid throughout life and the sum insured becomes payable only at the death of the insured. The policy remains in force throughout the life of the assured and he continues to pay the premium till his death. This is the cheapest policy as the premium till his death. This is the cheapest policy as the premium charged is the lowest under this policy. This is also known as ‘ordinary life policy’. This policy is suitable to persons who want to provide for payment of estate duty, make bequeathments for charitable purposes and to provide for their families after their death.

(2) Limited payment life policy :

In the case of whole life policy there is one disadvantage in that the assured must continue to pay the premium even during his old age when he is no more employed. Under the limited payment life policy premiums are payable for a selected number of years or until death, if, earlier. The assured knows how much he will be required to payable only at the how long he lives. The sum insured becomes payable only at the how long he lives. The sum insured becomes payable only at the death of the insured. It is a suitable policy to meet the family needs.

(3) Endowment policy :

It runs only for a limited period or up to a particular age. Under this policy the sum assured becomes payable if the assured reaches a particular age or after the expiry of a fixed period called theendowment period or at the death of the assured whichever is earlier. The premium under this policy is to be paid up to the maturity of the policy, i.e., the time when the policy becomes payable. Premium is naturally a little higher in the case of this policy than the whole life policy. This is a very popular policy these days as it serves the dual purpose of family and ole age pension.

(4) Double endowment policy :

Under this policy the insurer agrees to pay to the assured double the amount of the insured sum if he lives on beyond the date of maturity of the policy. This policy is suitable for persons with physical disabilitywho are otherwise not acceptable for other classes of assurance at the normal tabular rates. Premiums are to be paid for a selected term of years or until death, if earlier.

(5) Joint Life Policy :

This policy covers the risk on two lives and is generally available to partners in business. Policies are however, issued on the lives ofhusband and wife under specified circumstances. Sum assured becomes payable at the end of the selected term or on the death of either of the two lives assured, if earlier.

(6) With or without profit policies :

Under the “with profit or participating policies,” the policy holder is allowed a share in the profits of the corporation in the form of bonus and it is added to the total sum assured and paid at the time of maturity of the policy. In the case of ‘without profit or non-participating policies, no such profit is allowed. Premium in the first case is higher and is lower in the later case.

(7) Convertible whole life policy :

This policy initially provides maximum insurance protection at minimum cost and offers a flexible contract which can be altered at the end of five years from the commencement of the policy to an endowment insurance.

(8) Convertible term assurance policy :

This policy meets the needs of those who are initially unable to pay the larger premium required for a whole life or endowment assurance policy but hope to be able to do so within a few years. It would also enable such persons to take final decision at a later date about the plan suitable for their future needs.

(9) Fixed term (marriage) Endowment policy & education annuity policy :

It is a policy suitable for making provisions for the marriage or education of children. Premiums are payable for a selected term or till prior death. The benefits are payable for selected term or till prior death. The benefits are payable only at the end of selected term. In case of the marriage endowment, the sum assured is paid in lump sum, but in case of the educational annuity, it is paid in equal half-yearly installments over a period of five years.

(10) Annuities :

It is a policy under which the insured amount is payable to the assured by monthly or annual installments after he attains a certain age. The assured may pay the premium regularly over a certain period or he may pay the premium regularly over a certain period or he may pay a lump sum of money at the outset. These policies are useful to persons who wish to provide a regular income for themselves and their dependants.

(11) Sinking fund policy :

Such a policy is taken with a view to providing for the payment of liability or replacement of an asset.

(12) Multipurpose policy :

This policy meets several insurance needs of a person – like provision for himself in old age, income for his family and provision for the education, marriage or the start in life of his children. It gives maximum protection to the beneficiaries in the event of the early death of the assured, as it provides :

i) Regular monthly income during the unexpired term;

ii) Additional monthly income for a period of two years from the date of death;

iii) Payment of a part of the sum assured on death and

iv) Payment of the balance sum assured at the end of the selected period

On maturity the assured may get the sum assured in cash, in the form of monthly pension, or an increased sum payable on death. Premiums are payable during the selected term or till death, it earlier.