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Definition
Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a assigned beneficiary sum of money (the "benefits") upon the death of the insured person. Under a whole life assurance the policy money is payable at the death of the assured and under an endowment policy, the money is payable on the assured surviving a stated period of year. For e.g. on his attaining the age of 55 or his death, should that occur earlier.
Whole-life policies
A Whole Life Policy is an insurance cover against death, no matter of when it happens. Under this plan, the policyholder pays regular premiums until his death, following which the money is handed over to his family. This policy, however, fails to address the additional needs of the insured during his post-retirement years. It doesn't take into account a person's increasing needs either. While the insured buys the policy at a young age, his requirements increase over time. By the time he dies, the value of the sum assured is too low to meet his family's needs. As a result of these drawbacks, insurance firms now offer either a modified Whole Life Policy or combine in with another type of policy. 1. Ordinary Whole-life policies 2. Limited payment Whole-life policies 3. Anticipated Whole-life insurance policies
Endowment Policies
Combining risk cover with financial savings, endowment policies is the most popular policies in the world of life insurance. In addition to the basic policy, insurers offer various benefits such as double endowment and marriage/ education endowment plans. The cost of such a policy is slightly higher but worth its value. In an Endowment Policy, the sum assured is payable even if the insured survives the policy term. If the insured dies during the tenure of the policy, the insurance firm has to pay the sum assured just as any other pure risk cover. A pure endowment policy is also a form of financial saving, whereby if the person covered remains living beyond the tenure of the policy, he gets back the sum assured with some other investment benefits. 1. Money back plan 2. Educational endowment assurance plan
Annuities
A person entering into an annuity contract agrees to pay a specified sum of capital lump sum or by installment to the insurer. The insurer in return promises to pay the insured a series of payments until insured's death. Generally life annuity is opted by a person having surplus wealth and wants to use the money after his retirement. There are two types of annuities 1. Immediate annuities 2. Differed annuities
Supplementary benefits
1. Participation/non participations 2. Loan 3. Surrender value 4. Reduced paid up insurance 5. Extended term insurance 6. Automatic premium loan 7. Conversion option 8. Guaranteed additions 9. Loyalty addition 10. Return of premium
Classification of Policies
A. Duration of policy 1. Whole- life 2. Term insurance 3. Endowment insurance B. Method of premium payments 1. Single Premium Policy 2. Level Premium Policy C. Participation in profit 1. Non-Participating/ Without Profit 2. Participating/With Profit D. Number of lives covered or the Number of Persons Insured 1. Single Life Policies 2. Multiple Life Policies
E. Method of payment of claim amounts 1. Lump Sum Policies 2. Installment or Annuity Policies F. Non-Conventional Policies 1. Policies under LIC Mutual Fund 2. Jeevan Akshay 3. Jeevan Dhara 4. Jeevan Kishor 5. Jeevan Chhaya