TRADITIONAL LIFE INSURANCE POLICIES

In market there are different types of Life insurance policies are available for the different requirements of the peoples. A few popular are described below for all just to have an idea and choose whichever suits your requirement.

TERM POLICY

Term Life Insurance Policy is as its name suggests is taken for a specific term or a period of time and if the insurer dies during this period the nominee will get the sum assured.  This policy is although a low premium policy and does not pay any amount on survival of insurer. This policy is beneficial for the people who cannot afford a heavy amount on premiums. It is purely an insurance scheme and does not have investment features like others policies.

Types of Term Life Insurance Policies:

Yearly Renewable Term Insurance:

 This policy is issued for a period of one year and the insurer settles the claim if insured dies during this period. This policy can be taken for up to a certain age such as 65 years etc.

Level Term Life Insurance: The premium paid under this type of policy remains constant for the whole period. The longer the period, the higher is the premium. Because it cover the insured till older age where chances of deaths are higher. This policy can be renewed only on the discretion of insurer, subject to good health of insured.

Decreasing Term Life Insurance: Under this type of policy the benefits starts decreasing every year whereas, the annual premium is constant.  For eg. the benefits to the insured will be lesser if death took place in proceeding years, in comparing to starting period.

Increasing Term Life Insurance: The benefit also goes up along with the premium every year. Term insurance is helpful to those who do not have more money in initial years.

WHOLE LIFE INSURANCE

The purest form of Life Insurance is Whole Life Insurance also known as Ordinary Life Policy and the oldest in insurance history.  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/she continues to pay the premium till death. This is the cheapest policy as the premium charged is the lowest under this policy. This policy satisfies the original intention of life insurance which is to provide security to dependents on the death of the assured.  

The payment under the policy is assured and this policy does not have an end date. The assured can insure himself or herself for higher amounts (at comparatively low premiums) so that his dependents are well provided for in the event of his or her death. This type of policy requires premium payment to be made indefinitely and the policy holder may find it difficult to continue the premium payment during his old age. This type of policy is ideally suited to take care of estate duty liability. Duties or property tax is payable on the death of the assured by the legal heirs for transfer of property in their name. This duty at times can be very steep. The proceeds of the policy is useful for paying up these taxes.

Types of Whole Life Insurance                                     

Single Premium: The premium under this policy is paid only once at the time of inception of policy calculated as per the sum assured.

 Continuous Premium: The insured continues to pay the same premium as long as he or she lives at the same duration as decided upon at the time of inception of policy. The premium is calculated taking into account the probability of insured’s death and compound interest.

 Modified Whole Life Insurance: The premium paying option under this type of policy is flexible for the ease of insured. Generally, insured asked to pay low level of premium in the initial years and much higher amount in the later years as the earning capacity of the insured goes up.

ENDOWMENT LIFE POLICY

In this policy the insurer agrees to pay the assured or his nominees a specified sum of money on his death or on the maturity of the policy whichever is earlier. 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.  The premium is payable till the maturity of the policy or until the death of the assured whichever is earlier.

Double endowment 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 disability who 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.

JOINT LIFE POLICY

This policy is taken on the lives of two or more persons simultaneously. It covers the risk on two lives and is generally available to partners in business. Policies are however, issued on the lives of husband 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.

CHILDREN’S POLICIES

Fixed Term endowment (Marriage):  This policy is purchased by the parent and guardian for the purpose of marriage of their ward, they are regarded as the assured. A particular time is selected and the sum is paid to assured on expiry of term.  Premium is paid till the maturity of term or on the death of the assured. The sum assured is paid in lump sum at the end of term or on the death of assured whichever occur first. The logic behind this policy is to generate a lump sum for a major occasion like marriage.

Educational Annuity Assurance: This policy is similar to fixed term endowment (marriage) the difference is that the sum assured is paid in half yearly installments for 5 years, which is ideal to pay semester fees for higher education. These policies are taken forecasting the futuristic expenditure.  

MONEY BACK POLICY

Money back policy is working on the same platform like endowment plans work. The unique feature of this type of policy is certain share of sum assured is paid to the insured at a certain interval. At the end of policy term the remaining amount plus bonus occurred thereon is paid to the insured. If insured is died in between the term period the sum assured is paid fully and no premium is required to pay thereafter.