The life insurance contract provides elements of protection investment. After getting insurance, the policy-holder feels a sense of protection because he shall be paid a definite sum as the death or maturity. Let’s know detail about types of insurance policies.
Since a detonate sum must be paid, the element of investment is also present. In other words, life insurance provides against pre-mature death and a fixed sum at the maturity of policy. The two elements of protection and investment exist in various degrees in different types of policies.
Not only this, but these elements will vary according to the different times in the same policy. The older the policy, the losser the element of protection and higher the element of investment and vice-versa is also true.
Having different elements in different policies, the policy-holders are free to choose the best polices according to their requirements. It would be known that no one policy is the best policy for all the policy-holders due to variance in cost, elements of investments and protection, requirements of the policy-holders and availability of the policy.
Types of insurance policies
The life insurance policies can be divided on the basis of
- Duration of policy,
- Method of premium payments,
- Participation in profit,
- Number of lives covered,
- Method of payment of claim amount and
- Non-convention Policies.
Types of Insurance policies according to duration of polices
The life insurance policies according to the duration may be
- Term insurance,
- Endowment insurance and
- Survivorship policy.
1. Duration of policy
1.1 Whole-life policies
Whole-life polices are issued for life. It means that the policy amount will be paid at the death of the life assured. The life assured, thus, cannot get the policy amount during his life time; only his dependents will get the advantages of this policy.
The whole life polices can be effected either by payment of (i) single premium. (ii) continuous premium, payment or (iii) limited premium. The single premium payment is not very common whereas the limited premium payment is the most popular form of whole-life polices because, it is convenient to the policy-holder to arrange the payment of premium during his income-earning period.
In continuous premium payment, this benefit is not available because premium is payable up to the life of the policy holder. This is losing it importance because only the dependents of life assured are getting the benefit. Also, in extreme cases, he pays, more by way of premium than the benefits relievable under the policy and that too when earning capacity of the assured is reduced.
This plan is cheaper and suits to an young man with limited resources and wholes requirements for protection is maximum. It is, also beneficial to pay estate up policy for such reduced sum, as can be allowed according to the rules, will be automatically secured provided the reduced sum assured is not less than Rs. 250.
1.1.1 Limited Payment Whole-Lite Polices
The payment of premium is limited to certain period, although the amount secured under this plan is payable on the death of the policy-holder. Premium under this plan is higher than the premium payable under a whole life plan.
The amount of premium depends upon the number of annual premiums payable on the death of the policy-holder. Premium under this plan in is higher than the premium payable under a whole life plan.
The amount of premium depends upon the number of annual premiums stipulated since premiums are payable for a selected period of years or until death if it occurs within this perid, the life assured is satisfied to know the amount of maximum premium payable.
If the life assured survives the premium paying period, the policy continues in full force, provided all premiums have been paid, but no further premiums are required to be paid. With profits limited polices do not cause to participate in profits after completion of the premium-paying period but continue to share in the periodical bonus distribution.
This plan in suitable for persons in whose case the need for money would arise only on the happening of the death, but who either on account of personal and family period beyond their earning years. The minimum amount for which a policy will be issued under this plan is Rs. 1,000.
1.1.2 Convertible Whole-life Policy
This is a whole-life policy which gives its holder an option to get it converted at the end of five years, into an endowment policy. If this option is exercised, the policy no longer remains a whole-life policy, if it is not exercised the policy continues to be, a whole-life policy.
The policy is designed to meet the needs of the young man who is on the threshold of his career and has prospect for increase in income after a short period. The object is to provide maximum insurance protection at a minimum cost and at the same time to offer a flexible contract which can be allowed to an endowment policy, at the end of five years of the policy.
If the option is not exercised, the policy continues as a whole life assurance with premiums ceasing at age 70. If the policy in converted into endowment, the premium is suitably increased.
However, no difference in premiums for the previous five years, and interest thereon, will be charged and he is not required to go under fresh medical examination the vested bonus additions would be altered to an amount which the policy would have earned had it been effected from the commencement as an endowment policy and further, the policy would thereafter be intitled to bonus at the rate applicable to endowment assurance.
The minimum sum assured for which a policy will be issued under this plan is Rs. 5,000 and the maximum age at entry shall be 45 years.
1.2 Term insurance polices
Term insurance is far short period of years ranging from 3 months to seven years. Sum assured is payable only in the event of death of the life assured occurring during the period; but the assurance comes to an end, should the life assured survive.
The elected term premiums are usually payable throughout the term of the policy or till the prior death of the life assured at age 35 requires a single premium of Rs. 13.62 for a Rs. 1,000/- whereas the single premium rate far whole life without profit polices issued at corresponding age is Rs. 519.69. Term insurance policies are always ‘without profits.’
The term insurance polices are useful to those
- Who need extra-protection far a short duration or
- Who need protection for long duration but are unable to purchase for the time-being due to ill-health or lesser income,
- A young businessman can take the policy to save the business-disaster during initial stage of the business,
- Key-men’s insurance are generally on term insurance basis,
- A mortgagor of the property may be benefited by this scheme,
- A father can take this policy during the period of education of his child, and
- Any persons who are willing to provide insurance far a shorter period.
Term insurance are of the following types in India.
1.2.1 Straight-term (Temporary) Insurance
The corporation issues term-insurance for two years, Which is also called as two-years temporary assurance policy. The sum assured will be payable only in the event of the life assureds’ death occurring within two years from the commencement of the policy. A single premium is required to be paid at the outset.
The policies are issued only under, the without profits plan. The proposes is required to pay medical examination fee. The policy is not entitled to any surrender value and no loan can be granted on the security thereof because, it is not of accumulative nature payment is not always certain. This plan cannot be converted into other plans.
This policy is beneficial to the dependents who are required to pay Duty and to those persons who are given charity or donation of fixed property.
1.2.2 Renewable term Policies
These policies are renewable at the expiry of expiry of term for an additional period without medical examination; but the premium rate will be altered according to the age attained at the time of renewal. This policy is beneficial to those whose health are deteriorating and will be unisurabel at an advanced age.
With the help of this policy, they continue to enjoy the insurance benefit without going under fresh medical examination. However, the premium rate will be increasing according to the attained age. The policy-holder can renew it many times provided the attained age not crossed 55 years.
1.2.3 Convertible Term Policy
Under this policy, option to convert it into whole life or endowment policy is available. In corporation, the life assured under this plan has a option to convert the policy, provided it is in full force, into either a limited payment life policy or an endowment assurance policy, without having to undergo fresh medical examination, at any time during the specified term except the last two years.
If the option of conversion is exercised, a new policy under the limited payment life-plan or endowment assurance plan will be issued as the case may e subject to the rates of premium and terms and conditions prevailing on the date of conversion. In other words, the premium rates will be increased according to the age attained.
This policy is issued only to first class lives. Persons aged over 40 years nearer birthday at entry and those following hazardous occupation including persons in the Armed Forces will not be eligible for assurance under this plan.
Proposals on the lives of ladies are also not considered under this plan. Proposals for polices under this scheme will be entertained only form persons in government or quasi-government service, or in the service of reputed commercial firms.
The cost of medical, examination will have to be borne by the proposer. The minimum sum assured is Rs. 5,000 and the term is 5,6, or 7 years. Admission of age before issuing of policy is essential. Premium may be single, yearly or half-yearly installments only. No surrender values loan, paid-up values, no rebate in premium whether for large sum or for mode of payment of premium are allowed under this policy.
This plan is of much use to those who are initially unable to pay the larger premium required for a whole life or endowment policy. This is useful to those who desire to leave the final decision of permanent insurance at later date. The premium rate is considerably lower in this case. It is specially suitable to a young man with large family just entering in life who, due to his low, income, is unable to afford high premium required to give him adequate protection under a permanent policy.
1.3. Endowment insurance polices
The endowment polices can be several, of which important endowment polices are discussed below:
1.3.1 Pure Endowment Policy
The sum assured is payable on the life assurer’s serving the endowment term. In the event of his death within the term (endowment), premiums may be returnable or not. In corporation, all premiums paid, without any deduction, will be refunded to.
Thus the pure endowment policy is opposite of the term policy, because the insured is paid if he survives in pure endowment and if dies with, in the term in term policy. Actually, these two policies, i.e., pure endowment and termpolicies, are the bases of all other polices.
Pure endowment is for the benefit of the policy-holder and term policy in for the benefit of others. So, the pure endowment policy has the element of investment and the term policy has the element of protection. Pure endowment grants protection against living long while the term policy grants protection against living too short. The former is old-age protection while the latter is family protection.
This policy can be issued in the life of adult as well as in the life of child. In the case of a policy effected on the life on a child payment of premiums does not case on the death of the proposer but must be continued during the whole currency of the policy. Paid-up and surrender values are allowed on this policy. The mode of payment of premium under this plan is only yearly or half-yearly.
This policy is useful to the person who does not care to present himself for medical examination. This is also beneficial to those who, for reasons of health, would be unacceptable for life insurance on standard premium. It is a sort of compulsory saving for old age.
1.3.2 Ordinary Endowment policy
This is the policy which actually represents the life insurance in true sense. It provides an ideal combination of both the family protection and the investment. It is taken out for a specified term of years, the sum assured being payable either on the life assurer’s death during the period or on his survival to the end of the period.
Premiums are payable throughout the term of the policy or to a limited period or till the prior death of the life assured. Ordinary endowment policy is the combination of term insurance and of pure endowment. So, the net premium rate for an ordinary endowment policy Is equal to the net premiums of term and pure endowment polices issued at the same age, for the same period of time.
This provides solutions to various problems of life whether living too long or too short. In other words, the old age provision and the family protection is possible by purchasing only this single policy. Moreover, compulsory saving is possible due to this policy which is not present in other types of savings.
It is a means of hedging against the possibility of saving period being cut short by death. The next advantage of this policy is to meet the marriage; education or other requirements of the family.
1.3.3 Joint Life endowments Policy
This policy converse more than one life under a single policy. Under this plan, the sum assured is payable on the expiry of the term of or on the death of one of the assured lives during the endowment period. Premiums are payable throughout the endowment period or till the prior-death of anyone of the lives assured. The premium is calculated with certain modification according to the age of all insured partners. Paid-up and surrender values are payable on the policy.
This policy is suitable to partners of a firm because form will not discontinue on the tremendous outflow of the funds at death of a partner. This policy is also beneficial to a couple. The practice of granting insurance ot husband and wife under this plan was withdrawn in 1960; but it has again been reinstated.
The ceiling on the sum to be assured will be determined by the earned income on the wife or the husband whichever is less and also taking into account the previous insurance held on that life.
1.3.4 Double Endowment policy
Under this policy, if the life assured dies during the endownmetn period, the basic sum assured is payable and if the survices to the end of the term, double of the sum assured is paid. Premiums, are generally quoted according to the endowment period, irrespective of the age at entry subject to the provision that maturity age is beyond 65.
The term of policy is ranging from 10 years to 40 years but no policy is insured to mature at an age exceeding 65 years. This policy is combination of an endowment insurance and a pure endowment (without return of premiums) for the same period and for the same amount.
This plan in beneficial to the person who by reason of some physical disability is not eligible for acceptance at ht tabular rates under any of the other classes of insurance. This is also to benefit to those who are confident of living long but would like to have someone cover in the event of his early death. The investment element is higher than the protection element in this plan.
1.3.5 Fixed Term (marriage) Endowment Policy
Under this plan, the sum assured is payable only at the end of a stipulated period, but the premium eases if death of the policy-holder occurs earlier. In such an event the policy will remain fully paid until the maturity date but the beneficiary may discount the policy before maturity.
This plan is issued on without profit basis, paid-up values are paid under this policy. This policy is designed to meet the needs of a family man who wants to make available of certain sum for marriage of a female dependents.
1.3.6 Education Annuity Policy
Like marriage endowment policy, this policy is also taken out on the life of the father or guardian who undergoes medical examination. The child for whose benefit (education) policy is taken is called beneficiary. the difference is that the sum assured is not payable in, a lump sum but is payable, in equal instilments over a period of five years. It is payable half-yearly installments for five years.
The special feature of the plan is that there is a guaranteed and steadily increasing family provision during the selected period along with the old age benefit. The provision for the family does not terminate when the old age benefit is paid at the end of the period and no further premiums are payable thereafter, but a sum equal to the original sum assured still remains to be paid on the death of the life assured thereafter.
The following benefits are guaranteed provided the policy remains in force for the original sum assured.
A. If death occurs Within the stipulated period
The benefits benefits payable to the dependents, in this case, are:
- The basic sum assured, and
- A guaranteed bonus per annum equal to Rs. 25/- per-1,000/- sum assured for each full year’s premium paid excluding the first year’s premium.
This is a non-participating scheme where under the sum assured increases by fixed amounts during the term. The amount of guaranteed bonus is fixed and does not defend on the profits of the insurer.
B. On survival to the selected Term
The following amounts are paid at survival of the life assured at the selected term:
- The basic sum assured in cash, and
- Actually paid-up whole life assurance for a amount payable at death thereafter.
However, the life assured is given the following options in lieu of these two benefits : An increased cash payment
Fully paid up whole life policy for an increased sum assumed.
The alternative benefit of an increased paid-up assurance will be allowed without medical examination subject to the exercise of this option not less than three years before expiry of the selected term. Paid. Paid-up values are also given in this case. The benefits available under the policy on maturity will also be reduced in the same proportion.
The policy so reduced will thereafter be free from all liability for payment of premiums but shall loose all rights to the guaranteed additions assured in the event of death subsequent to the date of the conversion into a reduced paid-up value. Guarantee surrender value is applicable to this policy.
The plan is useful to a person who, in addition to providing cover for his family, wants to make some provision for his old age. It overcames the main drawback of the whole life policy. i.e., the assured is permitted to get the policy amount. The other advantage is that the insurance element greater than in an ordinary endowment assurance policy.
1.3.7 Anticipated Endowment policy
This policy is similar to endowment assurance except that a part of the sum assure is paid at certain interval before death within maturity of the death within maturity of the policy and the balance of the sum assured is payable maturity.
In the event of death at any time during the term of the policy, i.e., before maturity date, full sum assured is payable without any deduction of installments paid earlier. The policy may be issued both under with and without profit plan. The term may be 15,20 or 25 years.
The payment of policy amount by the corporation is as below:
- 1/5 of the sum assured becomes payable on the life assurer’s serving 5, 10 or 15 year according as the selected term of insurance is 15, 20 or 25 Years;
- Another 1/5 of the sum assured on his serving 10,15 or 20 years according as the selected form of assurance is 15, 20 or 25 years; and
- The balance 3/5th of the sum assured on his surviving the selected term of years.
But is the event of death at any time within the selected term the full sum assured is payable without any deduction or adjustment for amount that may have been paid earlier by wav of survivance benefit. The LIC has discontinued this policy.
The money back policy is useful for those who, besides desiring to provide for their own old age and family, feel the need for lump sum benefits at periodical intervals. Under this scheme, the following benefits are payable:
- For a policy with a term of 12 years, 1/5th of the sum assured becomes payable on the life assured’s surviving 4 years, a further 1/5the of the sum assured becomes payable on his surviving 5 years and the balance 3/5th of the sum assured on his surviving to the end of the term of 12 years.
- For a policy with a term of 15 years, 1/4th of the sum assured becomes payable on the his surviving 10 years and the balance 1/2 of the sum assured becomes payable on his surviving to the end of the term of 15 years.
- For a policy with a term of 20 years, 1/5th of the sum assured becomes payable on the life assured’s surviving 5 years, a further 1/5the of the sum assured becomes payable on his surviving 10 years, a further 1/5th of the sum assured becomes payable on his surviving the end of the term of 20 years.
- For a policy with a term of 25 years, 1/5th of the sum assured becomes payable on the life assured’s surviving 10 years, a further 1/5the of the sum assured becomes payable on his surviving 15 years, a further 1/5th of sum assured becomes payable on his surviving 20 years and the balance 2/5th of the sum assured becomes payable on his surviving to the end of the term of 25 years.
However in the event of death at any time within the selected term the full sum assured is payable without any deduction or adjustment for the amount that may have been paid earlier by way of survivance benefits.
The bonus additions to the policy will be reckoned of the full sum assured and are payable at the end of the selected term of years or at the life assrued’s death, if previous.
In the event of cessation of payment of the premiums under this policy, a paid up assurance, payable at the end of the selected term of years or at the life assured’s death if previous, is automatically secured provided premiums have been paid under the policy for not less than three years and a minimum paid up assurance of Rs. 250 exclusive of any attached bonus is secured.
All bonuses declared and attaching and attaching to the policy at the date of cessation of payment of premiums remain attached to the reduced paid up policy but the policy is not entitled to participate in the profits will be issued under this plan is Rs. 5,000. Further, policies will be issued for terms of 12,15,20 and 25 years only.
1.3.8 Progressive Protection policy with profits
This policy is very useful for those who want to provide additional insurance benefits for additional responsibilities. Only first class lives will be accepted under this plan. For the purpose of non-Medical (Special) scheme, this policy will be deemed to be for double the sum assured.
The sum assured increases automatically by half the initial sum assured at the end of five years and again by half the initial sum assured at the end of ten years, irrespective of the state of health of the policy-holder at that time.
In other words, medical evidence of health will not be required on the occasion of subsequent increase in the sum assured under the policy. After the benefits policy will be double the initial sum assured, payable on survival at the end of the selected term or on death within the term.
For the first five years, premiums will be for the initial sum assured. At the end of five years, and again at the end of ten years, the premiums will increase with the increase in the sum assured. Bonus will be paid at the end of the selected term or at the death of the life assured, whichever is earlier, and will be calculated on the initial sum assured for the first five years.
After the increase in the sum assured, bonus will be calculated on the increase sum assured form the date of increase. Loans will be available within the surrender value of the policy. If, after at least three full years premiums have been paid in respect of this policy, any subsequent premium be not duly paid, this policy shall not be wholly void, but the sum assured by it shall be reduced to such a sum as can be allowed according to the rules of the corporation.
The policy so reduced shall not be entitled to participate in future profits. Thei existing vested bonus additions, if, any, will remain attached to the reduced paid up policy. The maximum age at entry is 45 years and maximum maturity age is 65 years.
The plicy is offered for 20, 25, 30 and 35 years. The minimum sum assured for which it policy will be issued under this plan is Re. 5,000/- and the maximum will be Rs. 1,00,000. All polices taken under, this plan will be taken into account while arriving at the maximum sum assured.
1.3.9 Anticipated whole Life policy with Profits
This policy provides two distinct types of benefits in one policy-the benefit of whole life Limited Payment Policy and anticipated payments at five yearly intervals. It provides complete long-range insurance protection or the family and in addition helps meet various short-needs through periodical payments. The following benefits are available under this policy.
- For a policy with a term of 20 years, 1/8th of the sum assured becomes payable on the life assured’s surviving 5 years, a further 1/8th of the sum assured becomes payable on his surviving 15 years and a final 1/8th of the sum assured becomes payable on his surviving to the end of the term of 20 years.
- For a policy with term of 25 years, 1/10th of the sum assured becomes payable on the life assured’s surviving 5 years, a further 1/10th of the sum assured becomes payable on his surviving 10 years, a further 1/10th of the sum assured becomes payable on his surviving 20 years and a final 1/10th of the sum soured becomes payable on his surviving to the end of the term of 25 years.
However, in the event of death at any time, the full sum assured in payable without any deduction or adjustment for the amount that may have been paid earlier by way of survivance benefit. Premiums are payable for 20 or 25 years depending upon the premium paying term selected or till death if it occurs within the period.
The bonus will be reckoned on the full sum assured and will be payable at the life assured death. The policy will not cases to participate in profits after completion of premium paying period but will continue to share in the periodical bonus distribution for full sum assured until the death of the life assured.
No loan is payable under the policy during the premium paying period, but after the policy becomes fully paid up, loan will be available within the surrender value of the policy for such amounts and on such terms and conditions as may be prescribed form times to time.
The minimum mount for which a policy will be issued under this plan is Rs. 5,000. The maximum age at entry is 50 years for a policy with premium paying term of 25 years.
1.3.10 New Jans Raksha Policy
This policy has been designed taking into account the problem of non-payment of premiums in time. A special facility whereby the policy continues to provide full cover for three years on payment of an initial extra single premium has been incorporated under this policy. The benefits under this policy are, the same as those applicable for all endowment assurance policy with Profits.
The policy will be issued to male lives only. Polices will issued with, maximum age at entry of 40 years. The minimum age at entry will be 18 years completed. Policies will be issued for terms 12, 15 and 40 year only. The minimum sum assured for which policy be under this plan is Rs. 5,000 and tile maximum sum assured will Rs. 16,000. This sum assured will be issued in the denomination or Rs. 5000. Rs. 10,000 and R. 15,000.
In the event of non-payment of premiums within the days of grace, after the payment within the days of grace, after the payment of premium for the first two years, the policy will be kept in force for the full sum assured for a period of three years on payment of a single extra premium along with the first premium at a rate of Rs. 10,50 per thousand, for ages at entry 29 years and below and at a rate of Rs. 15.00 per thousand for ages at, entry 30 years and above.
No commission is payable on this additional premium. If any of this extra premium is not utilized for the risk cover, this unutilized portion will be refunded without interest at the time of claim arising by maturity or by death or at the time of surrender. After atleast two years premiums have been paid, if default occurs in the payment of premium, full death cover is continued for a period of three years from the first unpaid premium due date.
At any time during the first 36 months from the date of first unpaid premium, the policy –holder can pay the arrears of premium in full with interest or arrears of first two unpaid premiums with interest or first unpaid premium with interest. NO evidence of health will be required. In ease the arrears of premiums are paid in full, the facility of temporary assurance cover for further three years cha be availed of at a further date, during the learn of the policy.
If the arrears of the premium are paid in part only, the amount will be utilized towards the adjustment of premium starting form the first unpaid premium due date onwards; but no gaps in the adjustment of premium will be allowed.
The policy can be revived by payment of full arrears of premiums with interest, if the period elapsed from the first unpaid premium due date in more than 36 months but not more than 60 months. For revival after three years default in payment of premiums, a declaration of Good Health is necessary. After revival the facility of temporary assurance over for a further period of three years will be available.
1.3.11. Mortgage Redemption Assurance Policy
This policy meets the requirements of institutions and individual borrows to ensure that the outstanding loan is automatically extinguished in the event of the borrower’s death. The benefits under the plan at any time during the currency of policy would be the amount of outstanding loan at the beginning of the year as envisaged at the beginning of the transaction, and would become payable in the event of death of the borrower.
A schedule showing the amounts of outstanding loan at the beginning of each year would be drawn up at the outset on the basis of predetermined rate of interest. The benefits payable would be fixed as shown in the schedule and only these amounts will be paid under the policy irrespective of the actual loan payments.
The policies would normally be issued only to make lives aged upto 50 years at entry subject to the condition that the insurance cover would in no case extend beyond 65 years. It means the loans should be liquidated by single premium or annual premiums.
Policies on which premiums are payable annually or monthly will not carry any surrender value. The minimum sum assured, under the above plan shall be Rs. 10,000 except ill the case of large institutional lenders e.g. a Co-operative House Mortgage Society and the minimum sum assured for individual will be Rs. 5,000.
1.3.12 Children’s Deferred Endowment Assurance
Sometimes a parent or guardian or near relative of a child wishes take an insurance policy on the lift of the child under which the premium is paid by the proposer outing the first few years and by the life assured (i.e. by the child) thereafter. This can be done by taking the children’s deferred endowment assurance. The low premium rate under this plan is a great attraction.
A parent can help to his children to take a policy at a rate which is considerably lower than that what they would be called upon to pay at the attaining of majority. the second advantage of this policy is that the habit of thrift is developed among the child and from the very begging tries to saved some money.
The third advantage is that the cash value if the policy is discounted before or at majority, can be available for meeting specific expenses of education and marriage . The policy is taken on the life of child and not on the life of parent.
The parent is merely a proposer and in contracting on behalf of the child. The policy can be issued on whole life basis, too; but the corporation issues it on condiment basis.
Commencement of Risk
The risk does not commence immediately at the issue of policy but only on the policy anniversary. Following completion of 18 or 21 years. The policy envisages two stages, one covering the period from the date of commencement of policy to the deferred date, i.e., of commencement of risk in the child’s life, called deferment period, and the other covering the period from the deferred late to the date on which the policy emerges as a claim by the death of the child or its survival to a stipulated date.
A combined policy issued to cover both the aforesaid periods. Polices under his scheme are issued on the lives of children, both make and female who have completed one year of get but have not completed 18 year. No medicinal examination is required where the deferment period is 10 years or more. Polices under this scheme will not be issued for deferment period less than 4 years. The risk may commerce on the life of child since 18 or 21 years of his age, as desired by the proposer.
The provisions of this policy make it obligatory on the life assured to adopt the policy in writing that any time after attaining majority but before the deferred date. This provision is necessary to ensure that the life assured will be a major on the deferred date, i.e. will be of age 18 years.
On such adoption by the life assured, the policy will be deemed to be a contract between the corporation and he life assured as the absolute owner of the policy and the proposer or his estate shall not thereafter have any right or interest in the policy. The person entitled to the policy money will have the option of taking a cash payment in entire cancellation of the policy contract before the deterred date.
In the event of the life assured, death (the child’s death) before the deferred date, i.e., the date of commencement of risk, the policy shall stand cancelled and all premiums paid.
1.3.13 Children Anticipated policy with profits
This policy can be taken by parent or legal guardian or any near relative eon the life of a child on whose life risk will commence at the age of 18 completed, or 21 years as required by the proponent. The policy will automatically vest in the child at the end of the deferment period and half of the premiums paid during this period will be paid to him in lump sum.
Risk will commence at the Deferred Date and full sum assured will be payable on survival of the life assured to the of maturity or on his death, if earlier. The policy will attach bonus form the deferred Date at the Endowment Assurance Rate. This policy is issued on the lives of children both males and females up to the age of 14 years.
Like children’s Endowment policy, medical examination in not required where the deferment period is 10 years or more. Where it is less than 10 years, medical examination of the child is required. Policies are issued for maturity ages 35, 40, 45, 55 and 60 years. Polices under this plan will not be issued for deferment periods less than four years.
The proposals on the lives of minor girls will be entertained only when the father and other insurable members of the family are of adequately insured and the social, cultural, and educational back-round of the family is good.
An extra-premium on account of sex will be payable from the Deferred date. If the premiums due prior to the deferred Date have been paid, an amount equal to 90 per cent of the total amount of premiums paid excluding their premiums for the first year is payable as a cash option.
The policy will be cancelled in case the life assured dies before the deferred Date. A sum of money equal to the premiums paid will become payable to the person entitled to the policy moneys in such event provided the policy is in full force. The payment of premiums does no death of the proposer during the deferment period.
No loan, will be granted on this policy during the deferment period. Disability benefit unless specifically excluded will be available on this policy with effect from such date.
1.3.14 Jeevan Saathi
Jeevan Saathi is the new joint life Plan with a difference. The plan is designed to gift a total protection to families; particularly for the working couple.
Row Jeevan Sathi is different from the existing joint Life Plan!
Under the existing joint Life Plan two persons lives can be jointly covered and the Sum Assured becomes payable either on the first death or on the expiry of the selected term.
Under the Jeevan Saathi plan, only the lives of husband and wife are jointly covered. The basic S.A., together with vested bonuses are payable in event of survival to maturity of either or both of the partners. In the event of the first death of anyone of the lives assured, the survivor gets the basic Sum Assured. Again basic Sum Assured with bonuses is payable to the nominee, in the event of the premature death of the second partner.
Another important feature of this plan in that the premium under the policy ceases on the first death and the surviving partner need not have to pay any more premiums. But inspite of non-payment of premium after the first death, the policy will continue to participate the bonuses will till the final settlement.
From the benefits available it could be seen that a family that is used to certain economic comforts, gets a lump sum immediately, if one of the partners dies, to maintain level of economic stability.
Once again the basic Sum Assumed is paid to the surviving partner on, maturity or in the event of other early death, to the nominee. Thus this plan gives a total and compete insurance protection to the whole family.
What are the eligibility condition for purchasing life insurance, under this plan?
Policies under this plan will be issued on the lives of husband and wife, provide the latter belongs to Category-I.
The plan is available for specified Terms of 15, 20 and 25 years only. The age of the older life at maturity should not be more than 65 years.
The minimum basic Sum Assured, under this plan, is Rs.5,000/- and the maximum is Rs. 1,00,000/- under one or more policies.
The premium should be minimum Rs. 3 per thousand. S.A. over the premium under endowment Assurance on older life for the same term. The minimum difference between the double Joint Life Endowment Assurance premium and Endowment Assurance premium, As calculated in the aforesaid manner, is Rs. 3 per thousand S.A. only against Rs. Per thousand S.A. applicable to existing joint Life Endowment Assurance plan.
1.3.15 Married Women’s Property Act Policy
A married man can effect a policy on his own life, wife and/or children and shall be deemed to be a trust for their benefits and shall not, so long as any object of the trust remains, be subject to the control of the husband or his creditors, or form part of his estate.
The policy effected under Sect. 6 of the married women’s Property Act 1874 for the above purpose, shall not be aggregated with his other property provided the trust is absolute. The term ‘children’ means sons and daughters only and excludes an adopted son by Hindus. Grih lakshami Policy insured in December, 1975, is an important instance of Married Women’s Property Act Policy.
1.4 Survivorship, Reversionary or Contingent Assurance
There are two persons in this policy, first a named insured and another named person. The sum assured in payable if the life assured dies before another specified person (named person) or counter life. If the counter life dies first, nothing is payable and contract ceases. These assurances usually arise in connection with reversionary transactions.
Suppose in terms of a trust or will A will be entitled to certain property at the death of B provided A is then living, Here A possesses a contingent interest in that property and his interest has a market value. But the purchaser of the interest will receive nothing if A precedes B and, therefore, he effects a contingent assurance for the amount of capital.
The purchaser is thus fully protected because (a) the purchaser is thus fully protected, as he receives the capital form trust or will if A is living at B’s death, (b) he receives the policy money if A dies before B.
The rate of premium depend upon the age of the insured, of named person. When the life assured is young and the counter life is old the risk and premium, therefore, would be possible equal to that of a short period temporary insurance. If the ages are equal to or the counter life is younger the premium is roughly that of a whole life assurance. This policy is not widely written written.
2. Policies According to premium payment
The policies according to the premium payment may be of the following types:
2.1 Single Premium Policy
In this policy, the whole premium is paid at the beginning of the policy. As compared to the annual premium payable, it is costlier, but as compared to aggregate of all annual premiums payable, it is much smiler because all the premiums are received in advance and the insurer can earn additional amount on the premiums are not required to be paid.
2.2 Level Premium Policy
Under this policy regular and equal premiums are paid at a definite interval. This premiums lesser than the single premium and is convenient to make premium at a regular period. This may take the shape of an expense and can be constantly paid. The equal installments may be paid monthly, this monthly (quarterly), half yearly and yearly.
So, it suits the requirements of different types of the policy-holders. Since, originally the premium is calculated and charged on annual basin, the unpaid premiums for the year are required to be paid at the time of payment of calms due to death. The amount of each monthly, quarterly and half-yearly is not just the one twelfth.
One-fourth and one half of the annual premium because the issuer is involved in more expenses while collecting more frequent premiums and ins at loss of the interest for the balance of the annual premium . For monthly installments more frequents premiums and is at loss of the interest for the balance of the annual premium.
For monthly installments an additional charge of 5 per cent on the annual premium is mode to cover loss of interest and additional cost of collection. the additional charge of 5 per cent of the premium on shall be waived if the premium are paid through a co-operative society or by trustees of a staff provident or super-annotation fund or are collected by deduction form salary and remitted by or under the supervision of the corporation.
If premiums are payable yearly or half-yearly reduction of Re. 0.75 and RE. 0.50 per thousand of sum assured is ordinarily deductible from the annual premium. There is no deduction or reduction in quarterly premium. The level premium policy may be either continuous level premium or limited level premium policy.
3. Policies according To participation in profits
Polices according to participation in profits may be (i) without profit policies. And (ii) with profits polices.
(i) Without profit policies or Non-participating polices. The holders of without profit policies are no entitled to share the profits of insurer. These policy-holders get only the sum assured and no bonus is given to them.
(ii) With profit policies or participation policies. The holders of the with profit polices are entitled to share the profit of the insurer. Since the policy-holders can share the profit and not the loss, they can not be treated as co-owner of the insurance business.
If there is loss, the policy-holders cannot get bonus, i.e., the share in profit. They re entitled to get the share of profit, i.e., the bonus only when there is profit. The amount of bonus depends on the profit after deducting provision for taxes, contingency, etc. In participating policy there is no guarantee that the insured will get something by way of profit every year.
The only law is that the corporation has to distribute 95 per cent of its profits among the policy-holders. Thus, if there is no profit in a year, no amount can be distributed to the participating policy-holders. However, the corporation has decided that at least bonus rate of previous years should not decrease while declaring bonus in the present year.
The corporation issues both types of polices, i.e., participating and non-participating. Since the participating polices share profit the premium rate is higher in this case. the difference between the premiums of participating policies and of non-participating polices is called bonus loading because the additional premium in participating polices is charged bonus.
The amount of insurance to be paid is certain in non-participating polices but it is not certain in participating polices due to accrual of bonus, the rate of which is not constant.
4. Polices According The number of persons insured
On the basis of number of persons insured in a policy, the policy may be (i) single life polices, and (ii) Multiple life policy.
- Single life polices. Under single life polices, only one individual is insured. It is not necessary that the policy should be issued in one’s own life, it may be ins other’s life; but the fact is that this policy insures only one life. The policy amount is payable only when the assured event occurs.
- Multiple Life Polices. In this policy more than one life is insured. It may be (a) Joint Life policy, and (b) Last survivor policy.
- Joint Life policy. This policy covers two or more lives and the policy amount is payable on the fist death. This in beneficial to the partners of a firm and to a couple.
- Last survivorship Policy. The policy amount is payable at the last death. So long as any one of the insured is alive, no payment is made.
5. Polices according to the method of payment of policy amount
The policy amount may be paid in (i) Lump sum polices or (ii) installments.
- Lump sum Polices. Where the sum assured in said in lump sum at the events insured against.
- Installment or Annuity Polices. Under this policy, the policy amount is payable in installments. It is beneficial to those whose earning capacities are reduced to minimum in old are. At that time, this policy may be more helpful. He may continue to get up to a fixed period or up to death or both.
6. Policy types according to Non-Conventional Policies
The life Insurance corporation of India has introduced several non-conventional polices to meet the requirements of the population. The conventional polices have the main attributes of protection at early death or living too long; but majority of the population, is interested mainly in investment. The LIC has designed several new polices form time to time to meet these requirements. Some of the important new policies are described here.
- Policies under LIC Mutual fund
- Jeevan Akshay
- Jeevan Dhara.
- Jeevan Kishor
- Jeevan Chhaya
The LIC is conducting market research to find suitable polices to meet the requirements of the people. Every year, some policies are insured to benefit the population.
6.1 Policies under LIC mutual fund
LIC launched its Mutual Fund with a promise to the investors to provide high returns along withsafety and security of investment. LIC Mutual Fund entered the Indian capital market on 19th June 1989. During the first year of operation LIC Mutual Fund came up with 5 schemes which provide distinct dhanashree 1989, Dhan 80 CC (I) and Dhanvarsha while the other two schemes viz., Dhanaraksha 1989 and dhanavridhi 1989 are open ended schemes. Dhan 80 CC B (I) has been introduced since Feb. 11, 1991. The salient features of dhanasahayog and Dhan 80 CC B (I) are given to illustrate the LIC Mutual Fund Policies.
6.2 Jeevan Akshay
In return for purchase price paid by the purchaser a monthly pension will be paid during the lifetime or the purchaser of the pension.
The last payment would be falling due prior to the date of the pensioner. No medical examination is necessary to get the policy.
Post-dated monthly cheques are sent in advance for the whole year. No existences certificate is required for receipt of the pension.
Pension cheques are payable at par on all branches of the Central Bank of India and such other nationalized bank which LIC may notify.
On the death of the pensioner, the original amount invested by the employee along with an additional bonus will be returned to the nominee or his legal heirs.
The minimum amount to be invested (premium) is Rs. 10,000 and in multiples of Rs. 100 thereafter. There is no maximum limit.
For every Rs. 10,000 purchase price, pension payable would be Rs. 100 per month.
Minimum age at entry is 50 years. There is no restriction as regards maximum age at entry. Only persons aged 50 or more can avail of pension benefits on their own lives.
Since the pension is payable monthly, the gross annual return works out to nearly 12.7 per cent an excellent return by any standard on a safe, long-term investment. The plan guarantees the return for the lifetime of the pensioner which can be as long as 50 years or more. No other investment guarantees such a high rate of return of such return for such a long period. The rate of return is guaranteed even when the rate of interest falls in the future.
The Jeevan Akshay polices also enjoy various tax benefits.
6.3 Jeevan Dhara
The payment of annuities in respect of polices under Jeevan Dhara has to start one month after the completion of the deferment period. In order to enable the annuitant to get the payment on the due data, the annuity cheque has to be posted at least two weeks earlier. Since Jeevan Akshay/Jeevan Dhara Payments are centralized at Zonal Offices, it menas that the input forms for building master records for payment of annuities have to reach the Zonal Machine department well in advance to enable them to process it and dispatch the cheques to the annuitant about two weeks before the date of vesting.
However, in the case of policies under SSS, the payment premium will be received only after the date of vesting, making it impossible to build the master record in time. The delay in building of master record will be much more when there are gaps, in premium payment. This in one of the reasons behind discontinuing issue of Jeevan Dhara policies under Salary Savings scheme.
The problems involved in building the master record in time are being faced, to a lesser extent, in the case of polices under are half-yearly mode of payment also.
In order to obviate these difficulties, wherever the mode ins other than single single premium, it has been decided to limit the premium paying term under Jeevan Dhara Plan to one year less than the deferment period. That is, if the deferment period under a policy under a policy is 20 years, the premium paying term well be limited to 19 years. (The amount of annual premium shown against term 20 in the Premium tale will be payable for 19 years). If the deferment period is 15 premium paying term with be limited to 14 years. Polices with deferment period of 2 years will be issued only as single premium policies.
Revival of Jeevan dhara Policy which has been in a lapsed condition will not be permissible in the last year of the policy term because of he problems involved in preparation of cheques in time the revised rates of annual premium for Jeevan Dhara policies ins enclosed herewith (annexure I).
Mode of payment of premium: the premium can be paid yearly or half-yearly or salary saving Scheme only.
Jeevan Dhara Policies under SSS: Effective from 1st December, 1990, Jeevan Dhara polices can be issued under salary savings scheme.
Rebate for mode of payment of premium: A rate of 1.5% of the Tabular Premium s allowed if the mode of payment of premium is yearly. No rebate is allowed for other modes of payment.
6.4 Jeevan Kishor
Jeevan Kishore with profit plan further curtails the age form which the risk on child’s life is covered. As previsions of this policy, risk commences either two years form thirds the date of commencement of from the policy anniversary following immediately after the completion of 7 years of age, whichever is later. Contrary to participation in bonus from the deferred date, or the risk date or vesting date, this policy allows participation in bonuses form the very date of commencement of policy. However, vesting of the bonus was allowed either from the risk date 5 years from the commencement of the policy, whichever is later.
The salient features of the plan are as follows:
Who are eligible?
Children, both male and female, between the ages of 1(last birthday) and 12 (last birthday) are eligible to be proposed for insurance under this plan.
Who can propose?
- If both parents are alive, generally the father should propose. However, if the mother has an income of her own, she can be, the proposer.
- If father is not alive, mother can propose.
- If both parents are not alive, then the legal guardian can propose.
The policy is eligible for bonus even during the waiting period. However, the bonus for the waiting period will vest only on the policy anniversary from which the risk is covered or at the end of five years from the commencement of the policy, whichever is later, provided the policy is then in force for full sum assured.
Vesting of the policy
The policy shall automatically vest n the life assured on the policy anniversary falling on or immediately following his/her attaining majority.
The sum Assured along with vested bonus and final additional bonus, if any, will be payable or maturity or on death if earlier, provided the death occurs on or after the date of commencement of risk.
In case of death of the child before the date of commencement of risk, the premiums paid (excluding the premiums for premium waiver benefit) will be refunded.
Premium Waiver Benefit
There is also the provision for waiving of premium under the policy till the child attains majority in the event of death of the proposer. This premium waiver benefit is available subject to payment of a small, additional premium and medical examination of the proposer.
Medical Examination of the child
No medical examination will be necessary if the age of the child as on the date of proposal is less than 10 years (last birthday). Otherwise, medical examination will be necessary. Only Standard Lives will be eligible for Insurance under this plan.
6.5 Jeevan Chhaya
“Jeevan chhaya” introduced in March 1991, can be considered to be a combination of ‘Jeevan Mitra’ and Money back plans.
Couples having a child (to an adapted one), of age less than one year can avail of this plan, in order to ensure that an adequate financial provision in made for the higher education of the child. The child should not behave completed one year of the date of registration of the proposal. Either father age or mother or each one of them individually can take polices or under this plan.
The premium under this plan payable during the life time of the life assured and shall cease on the death of the life assured or on the expiry of the term of the policy, whichever is earlier.
The benefits under the Jeevan Chhaya’ plan are:
The following benefits (on all inforce policies) are payable whether or not the life assured survives the term of the policy:
- One fourth of the sum assured each at the end of (n-3), (n-2), (n-1) and nth year (where n is the term of the policy).
- Bonus for the full term on the sum assered on the date of maturity.
For example, if the term of the policy is 20 years, one-fourth the sum assured will be payable at the end of the 17th, 18th, 19th and 20th year. The bonus on full sum assured for the full term of the policy along with final additional bonus, if any, will be payable at the end of 20 years.
In addition to the above fixed benefits, one additional sum assured will be payable on the death of the policy-holder at any time during the term of the policy. (Future premiums, falling due from the policy anniversary following the date of death will stand waived.)
For example, if the term of the policy is 21 years, one-fourth the sum assured in payable at the end of 18th, 19th, 20th, 21st year. If death occurs during the 19th year, full sum assured (without bonus) will be payable immediately. One installment of one fourth the sum assured would have already been paid at the end of the 18th year. The balance three installments of one fourth sum assured, each due at the end of the 19th, 20th and 21st year, and the bonus on full sum assured (for the full term) due it the end of the 21st year shall be paid to the person eligible to receive the policy moneys.
- The term can be 20,21,22,23,24 or 25.
- Minimum sum assured Rs. 10,000
Mazimum sum assured Rs. 1,00,000
3. Minimum age at entry 20 Maximum age at entry (nearer birthday) 40 (nearer birthday).
The maximum age at entry can be raised to 45 if the original or attested Xerox copy of birth certificate or school certificate is submitted as age proof.
4. Maximum maturity age 65 (nearer birthday)
Proposals under this plan can be entertained under non-medical (general) scheme, both in respect of male and female lives upto Ruoees one lakh sum assured. However, if anything adverse is indicted at the time of underwriting and the case cannot be accepted under non-medical, then the regular underwriting procedures like calling for full medical report, special reports (if need be) are to be followed.
In the case of female lives, the following three restrictions will apply.
- Only category-I and category-II female lives will be eligible for insurance under this plan,
- No proposal will be entertained within 3 months of the date of delivery.
- In case the female life had undergone a caesarian operation, a single extra premium of Rs. 5 per thousand sum assured is to be charged.
The father and, mother should, jointly song a declaration regarding the date of birth of Rs. 5 per child.
Similarly Jeevan Suraksha has been introduced on Aug 15, 1996 to meet the requirements of all categories of people.
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