Insurance is a financial risk management tool in which the insured transfers a risk of potential financial loss to the insurance company that promises to pay a sum assured for occurrence of an unfortunate event and insured promises to pay a mutually agreed premium.
Life Insurance is a financial cover for a contingency linked with human life, like death, disability, accident, retirement etc. Human life is subject to risks of death and disability due to natural and accidental causes. When human life is lost or a person is disabled permanently or temporarily, there is loss of income to the household.
Some of the different types of life insurance policies are given below:
Whole Life Policy: A term assurance plan with an unspecified period is called a ‘Whole Life’ policy, under which the sum assured is paid on death, whenever it may occur. But unlike a term assurance plan, some payment will be made at some time. Although, in such type of policies, the sum assured is payable only on death, some insurers pay the sum assured, when the life assured completes a certain age, say, 80 years.
Money Back or Anticipated Endowment Policy: A money back policy provides for periodic payments of partial survival benefits during the term of the policy, so long as the policyholder is alive. In the event of death at any time within the policy term, the death claim comprises full sum assured without deducting any of the survival benefit amounts which may have already been paid as money back components. It is effectively a combination of a term assurance plan for a certain period for full sum assured and certain pure endowment plans for different periods.
Limited Premium Payment Policy: A policy in which the premium is payable for a period shorter than the policy term is referred to as ‘Limited Premium Payment’ policy.
Joint Life Policy: Two or more lives can be covered under one policy in a Joint Life policy. It usually covers married couples or partners. The sum assured is paid on the death of any one of the insured persons during or at the end of the term of the policy. Some plans also provide payment of sum assured on the death of one life and the policy is continued to cover the second life till maturity, without payment of further premium.
Convertible Policy: It is a plan of assurance, which provide, in its terms and conditions, that it can be changed to another plan after, or within, a certain period after its commencement. When the right of conversion is exercised, there would be no further underwriting decision to be made. There would be no medical examination at that time.
Children Policy / Child’s Deferred Assurance Policy: Insurance can be taken on the lives of children, who are minors. The proposal will have to be made by a parent or a guardian. Risk cover on the life of the insured child will begin only when the child attains a specified age. These policies have conditions whereby the title will automatically pass on to insured child, on his attaining the age of maturity. This process is called ‘vesting’. After vesting, the policy becomes a contract between the insurer and the insured person. The main advantage to these plans is the premium would be relatively low (age of the child at commencement) and cover will be obtained irrespective of the state of health of the child.
Salary Savings Scheme (SSS) Policy: SSS policies, sometimes also called ‘payroll insurance’, are also intended to cater to the needs of working classes. The insurer arranges with the employer to deduct the premium from the salary of the worker policyholder and remit the same to the insurer’s office every month.
Policies covering Handicapped: Under such policies, physically handicapped persons are insured. Extra premium is charged in some cases like, loss of both arms, deaf in both ears, blind in both eyes, etc. partially handicapped persons are mostly accepted without extra premium.
Group Insurance Policy: Group insurance is a plan of insurance, which provides cover to a large number of individuals under a single policy called the ‘Master Policy’. The individuals covered under the master policy are not parties to the contract. The contract will be between the insurer and a body that represents the group of individuals covered. Because the contract is with the body, the body is the policyholder. This body may be the employer, who is interested in obtaining benefits for his employees through insurance.
Industrial Assurance Policy: Industrial assurance policies are designed for workers with low incomes. The policies are issued for small sum assured, with weekly premiums. The arrangement is that the agents will visit the house or place of work of the policyholder every week to collect the premium.
Unit Linked Insurance Plans (ULIPs): It is a financial instrument which is a combination of insurance as well as investment.
Type – I: It is a type of ULIP in which at the time of maturity/death, sum assured or fund value (whichever is greater) is paid.
Type – II: It is a type of ULIP in which at the time of maturity/death, both sum assured and fund value is paid.
The cost of medical treatment is rising as days are passing by. As the age of human being or family size increase, medical expenses tend to rise significantly. Without a suitable health cover in place, medical expenditure can drain liquid assets and create a lasting impact on one’s financial plan. That is why, it is advised to purchase a suitable and appropriate health insurance policy, under which the cover is available for medical expenses incurred due to various health hazards. The premium paid towards a health insurance policy provides tax rebates under one or more of Sections 80 D, 80DD and 80 DDB of Income Tax Act, 1961.
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It offers protection against bodily injuries, death, physical damage and third-party liability arising out of accidents involving motor vehicles. It can be broadly classified into three heads.
A standard fire insurance policy covers damage to the property caused by fire, lightning or explosion, where this explosion is brought about by gas or boilers not used for any industrial purpose.
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Personal accident insurance provides financial coverage against unforeseen events such as accidents causing bodily injury, permanent partial disability or permanent total disability and accidental death.
Contact an expertCritical illness insurance was developed in 1996, as people realized that surviving a heart attack or stroke could leave a patient with insurmountable medical bills. This insurance policy provides cover on the insured suffering from several dreaded diseases. The policy holder gets the entire sum assured amount and he does not have to submit the proof of the expenditure done or to be incurred. Also, some policies come with a premium waiver benefit where after diagnosis of critical illness, the future premium payables are waived off.
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This policy is meant for professionals to cover liability falling on them as a result of errors and omissions committed by them whilst rendering a professional service. The policy offers a benefit of retroactive period on continuous renewal of policy, whereby claims reported in subsequent renewal but pertaining to earlier period after first inception of the policy, also become payable.
The policy covers all sums which the insured professional becomes legally liable to pay as damages to third party in respect of any error and / or omission on his / her part committed whilst rendering a professional service.
Only civil liability claims are covered. Any liability arising out of any criminal act or act committed in the violation of any law or ordinance is not covered under this. The policy is meant for professionals like doctors, engineers, architect, lawyers, chartered accountants and management consultants.
