Types of life insurance policy

There are three types of life insurance policy

 (1) Term policies  (2) Whole life policies (3) Endowment policies

(1) Terms policies: This is a short term plan normally from 3 months to 7 years. The sum assured is payable only on the death of the life assured but if he survives. Nothing is payable and the contract of insurance comes to be as end.

(2) Whole life policies: These types of policies are issued for whole life. The sum assured is paid to | the nominee in the event of death of assured. Assured cannot get the policy payment during his life | time. The whole life policies can be further classified as under:

(a). Ordinary whole life policy: Under this policy premium are payable throughout the life time of assured. The policy is suitable to those persons who desires to make Provision  dependents.

(b.) Limited payment whole life policy: Under this policy although the premiums are paid to a selected period but the sum assured is paid only in the event of death, to the dependents of the assured. If the assured survives up to the selected term, the payment of the further premium is stopped but the sum assured is paid only after his death.

(c) Convertible whole life policy: This plan has been designed to meet the needs of the young persons who starts their carrier and expects early increase in the income after a short period. The object of this plan is to provide maximum insurance protection at a minimum cost with an additional offer at the same time to convert the policy into an endowment plan after the expiry of five years, when there would be a substantial increase in income. Thus the option to convert the policy into an endowment is available at the end of five year and it the option is not exercised the policy continuous to be a whole life policy.

3.Endowment policy: Endowment insurance is a type of life insurance contract which provides for the sum assured to be paid either at death or after a fixed number of years whichever earlier. The premium is higher endowment policies compare than whole life policies. The premium of this type of policy may be paid in monthly, quarterly, half yearly or yearly. In the present days this is the most popular form of life insurance. There are various types of endowment policy available.

(a) Ordinary endowment: The policy: is an ideal combination of both the family protection as well as investment. The policy is taken out for a specific term and the sum assured is paid either on the life assured’s death or in his survival, at the date of maturity. The premium is paid throughout the policy term or up to the death of the assured whichever is earlier

(b) Pure endowment: Under this plan of insurance the sum assured is payable only on the life assured’s surviving the endowment term. If, the assured dies during the specified period the premiums are returned without any deductions. This plan is just opposite to the term of insurance wherein, the sum assured is payable only on survival.
(c) Joint life endowment policy: The policy is issued to cover more than one life under a single policy. This policy is ideal to the partners of the firm or husband & wife. The sum assured is payable only on the expiry of the terms or on the death of anyone of the assured, during the endowment term.
(d) Double endowment: The plan provides the payment of sum assured if the assured dies during the selected terms. However, if assured survives in the term, double of the sum assured is paid. The policy insures the benefit of family protection in the even to early death with an additional benefit to make the payment of double the sum assured, if he survives in the selected terms. This policy is ideal to those individuals who are confident of surviving at a particular age.

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Process for life insurance poliicy

  •  Selection of type of life insurance policy: Having different elements in different policy, the policy holder are free to choose the best policy as to their requirement . It should be noted that no one policy is the best policy for the all policyholders, due to variance in cost, elements of investment and protection etc.
  •  Filling up insurance form: Generally, life insurance policy are taken through an authorized agent of the life insurance co-operation. After selection the policy, the proposal is required to fill up the proposal form. The proposal form contains the followings details:
  • (a) Proposals name, nationality, permanent address, occupation, nature of business, father’s name etc.
  • (b) Terms of assurance. sum to be insured. payment of premium. monthly. Quarterly, or half yearly or yearly, amount of premium date of birth proof of age.
  • (c) Name of nominee, age, relationship with insured.
  • (d) Particulars about the illness like cancer, Aids, diabetes etc. Page:
  • (e) At the end, the proposal has to make a declaration that the statement given in the proposal are correct and no information is concealed.
  • Medical examination: After completing the proposal form, the proposer has to undergo a medical examination through one of the approved medical doctor on points regarding his health, height & weight.
  •  Agents confidential report: After the medical report. the agents confidential report is submit to the Insurance company. The purpose of this report is to inform to the life insurance co – operation regarding the object of insurance, financial position of the insurance and his health condition. 
  • Acceptance of proposal form: After getting medical report and confidential report of agent, the insurance co. after analyze those reports can accept or reject the proposal. The first premium notice is sent along with the letter of intimation regarding the acceptance of the proposal.
  •  Payment of premium: After getting the first premium notice, the insured pays the premium amount. After the payment of first premium the risk. commence and proposal becomes insured. The insurance company is liable to pay the amount of insurance in the event of premature death or the time of maturity, whichever is earlier.
  • Issue of policy: Having completed all the required formalities, the insurance company prepares the life insurance policy and sends it to the insured. The back of the policy contains all the details of the proposal. i. e. . name. address. sum assured. mode of premium. maturity date & insured amount etc.

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