Life Insurance Planning is planning for a situation when the individual on whom the family is dependent for fulfillment of their goals is not alive. In case of one’s death, the family may face two types of losses: Financial Loss and Emotional Loss. While the latter happens in all the cases, the former happens if an earning member of the family dies. Life insurance helps the family to overcome this financial loss, by analyzing and estimating the financial loss the family is likely to incur and by considering one’s family expenses and future goals.
1) 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.
2) 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.
3) 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.
4) Single Premium Payment Policy:
In a limited premium payment policy, if the limited period is only one year, then it is referred to as ‘Single Premium Payment’ policy.
5) 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.
6) Convertible Policy:
It is a plan of assurance, which provide, in its term 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.
7) 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.
8) 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.
9) 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.
10) 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.
11) 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.
12) Unit Linked Insurance Plans (ULIPs)
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