What are the different types of life insurance policies?


What are the different types of life insurance policies?

If you are considering life insurance, you should know what are the different types of life insurance policies available to you. Here’s a brief description of such policies:

(1) Whole life Policy:

On buying this policy, you need to keep paying premiums for as long as you are alive and the amount assured is paid only after your death. This policy, also called ordinary life policy, carries the minimum payable premium. This is an ideal policy when you want to extend financial assistance to your family after your death or when you want to leave funds for any charitable organization or make arrangements for payment of estate duty.

(2) Limited payment life policy:

One drawback of the whole life policy is that assured person needs to pay premiums even in his old age, on getting retired. Limited payment life policy eliminates that drawback by allowing the assured to pay premiums for specific number of years or till their premature death. In this case the sum assured is paid only after the assured dies. The amount comes handy for the family of the deceased.

(3) Endowment policy:

This remains valid only up to a certain age or a limited number of years. The sum assured falls due for payment when the assured attains a specified age or at the end of a specified number of years, called endowment period or on the death of the assured, whichever takes place first. Premium needs to be paid till the validity of the policy or its maturity. This policy demands a slightly higher premium than the whole life policy.  Consumers prefer this policy for the double benefit of family and pension it offers for old age.

(4) Double endowment policy:

With such a policy, the insurer promises to pay double the sum assured to the insured if he outlives the maturity date of the policy.  It’s an appropriate policy for physically disabled people who can’t be covered by other kinds of policies at the usual rates. Premiums have to be paid till expiry of the term or till death before it gets expired.

(5) Joint Life Policy:

Such a policy would cover the risk of life for two people, usually business partners, though under special circumstances the policy may include the lives of wife and husband. The sum assured is payable at the end of the chosen period or when either of the two insured people dies before the expiry of the policy.

(6) Policies with or without profit:

Policies with profit allow the policy holder to share a part of the profits of the company that is paid via bonus, which gets added to the sum assured but paid when the policy gets matured. In case of policies without profit no profit is shared. Obviously, the premium for former kind of polices is more that the latter kind.

(7) Convertible whole life policy:

Of the many different types of life insurance policies, this policy has a unique feature.  The benefit of this policy is that in the beginning it offers utmost insurance protection at the least expense and includes a flexible contract that allows the policy to be modified to an endowment insurance policy after completion of five years from the date of starting.

(8) Convertible term assurance policy:

This policy is designed to help consumers whose financial position doesn’t permit them to pay hefty premiums towards a whole life or endowment insurance policy in the beginning but expect to make larger contributions after a couple of years.  An outstanding advantage of this policy is that the consumer gets sufficient time for choosing the most suitable plan as per their future requirements.

(9) Fixed term (marriage) Endowment policy & education annuity policy:

This policy aptly takes care of the expenses of education or marriage of children. Premiums are to be paid for the chosen period or till premature death. Benefits are paid for the chosen term or till premature death. The same are paid only at the end of the term. For marriages, the amount is paid via a lump sum but in case of education annuity, the same is paid twice a year through equal installments for duration of five years.

(10) Annuities:

This kind of policy enables the assured to receive insured amount through monthly or yearly installments after having reached a specific age. The assured has the option of paying premiums regularly for a defined period of time or pay a lump sum amount towards that in the very beginning. Such policies are helpful when you want to have a regular income for yourself or your dependents.

(11) Sinking fund policy:

This type of policy is helpful when you want to have provision for paying any liability or having a substitute for an asset.

(12) Multipurpose policy:

It answers many requirements of insurance for the assured person. For instance it provides funds for his old age, his family or for education and marriage of his children or providing initial funds for their life.  It offers highest protection to the recipients in case of premature death of the assured as it offers:

i) Steady monthly income for the unexpired term

ii) Extra monthly income for two years from the date of death;

iii) Part payment of the sum assured on death

iv) Assured payment of the rest of the assured sum at the end of the chosen period

On maturity of the policy, the assured can get the assured amount in cash or by way of monthly pension or an enhanced amount payable at death. Premiums need to be paid for the chosen term or till premature death, whichever is earlier.


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