Type of policies available in Life Insurance
Ø Whole Life Assurance
The sum insured is payable ONLY on the death of the assured wherever it occurs.
Premium are payable through out the life of the assured or normally up to 60 to 65 years. Even though premium payment is stopped, the policy remain in force and it will provide benefit for the dependents on the death of the policyholder as and when it will occur.
When the policy under which premium are payable throughout the life is called WHOLE LIFE WHOLE TERM policy, where the premium paying term is limited i.e. up to 60 or 65 years, they are called as LIMITED PAYMENT WHOLE LIFE policy.
Ø Endowment Assurance
In Endowment Assurance policy the term is fixed up to certain no. of years e.g. 15, 20, 25 or 30 years. The sum assured is payable in the event of the death within the term of the policy. The sum assured will also be payable even if the life assured survives till the end of the policy.
Endowment insurance is used as collateral security for house mortgage. The premium will be higher than the other life policy but the entire loan amount can be paid out of the policy proceeds on completion of the policy term or on the death of the policy holder occurring earlier.
There are Anticipated endowment or Money Back policies under which certain agreed % of sum assured will be payable at an interval of 4 or 5 years and the remaining sum assured along with the accrued bonuses will be payable on the maturity dateof the policy.
Ø Assurance for children
There are two common schemes – Child's Deferred Assurance and the School Fee Policy.
Under Child's deferred Assurance, the policy is effected on the life of a parent with an option date. Option date generally is the child's 18th or 21st birthday.
Should the parent survive until the option date, the child may continue the policy in his own name from then on as either an endowment or whole life assurance without further medical examination or a lump sum payment may be taken at option date.
In the event parent dying before the option date, the policy is continued, without payment of premiums, until the option date. On option date, any of the above can be decided by the child.
In case, the child die before the state age, the premium will be returned to the parent. The parent can, in such case, substitute another child in the place of late child.
Policy for School Fees can be made by effecting Endowment Policy on the life of the parent with the Sum Assured, payable in installments over the period of schooling.
Ø Term Assurance
Term assurances are temporary contracts, which provide only basic death cover. This is the cheapest form of life insurance. It is valid for fixed term and money is payable only on the death of the life assured during that term. No money is payable on surviving of the life assured till the stipulated terms.
Whole Life policy in effect is a term policy without the limitation of a period.
Term assurances do not generally have surrender or loan values.
Increasing Term Assurance – in inflation, term assurance with a fixed sum assured gives a reduced amount of cover over the years. To counter this problem, term assurance policies are offered with some form of escalating sum assured. The premium would be fixed throughout the term however the sum assured will be linked to cost of living index.
Decreasing Term Assurances – Term assurance of this type has a sum assured which reduces every year or even each month, by stated amount decreasing to nil at the end of the term. Normally to cover a reducing debt, e.g. housing loan, with the sum assured being linked to the reduction in housing loan on payment of monthly installment by the life assured. Even though sum assured is decreasing the premium remains same.
