Friday, August 21, 2009

KINDS OF LIFE INSURANCE POLICIES

Different insurance company can introduce different kinds of life insurance policies. Some of them are classified in to the following kinds.

1. Whole life policy

The whole life policy will mature only on the death of the insured. This kind of policy is done to protect the dependents of insured in which low premium is paid up to his life. Although, this type of policy has no financial gain to insured, reach persons prefer to take this kind of policy to make provision for the payment of death duty. The policy can further be classified as under.

  • Ordinary whole life policy : Under the ordinary whole life policy premiums are payable throughout the life of the insured and the insured sum is payable to his dependents or nominee only after his death.
  • Limited premium whole life policy : Under the limited premium whole life policy, the premium is paid for a limited or selected period (say up to 20 years) but the policy will mature for payment only on the death of the insured.
  • Single premium whole life policy : Under this policy, the insured is liable to pay the total premium once in a life but the insured sum is payable to his dependents only after his death.
  • Convertible whole life policy: The convertible whole life policy gives the option to the insured for conversion into endowment policy after the expiry of five years of the policy.

2. Endowment policy

Endowment policy is issued for a fixed period and the premium is payable during that period only. The insured sum is payable to policy holder after the expiry of the period or to his nominee on his death which ever is earlier. This type of policy is most popular because it provides financial security on old age sufferings. The following are the different types of endowment policies.

  • Ordinary Endowment policy : The ordinary endowment policy will mature for payment on the survival of the date or his death within the endowment policy which ever is earlier.
  • Pure Endowment policy: The pure endowment policy will mature for payment, only if the insured person survives up to the endowment period otherwise the insured sum is not payable by the insurance company.
  • Double Endowment policy : Under this policy, if the insured survives up to the endowment period, he will get double the sum insured or only the insured sum is payable on his death within the endowment period.
  • Anticipated Endowment policy : Under this policy, a part of sum insured is paid at certain intervals during the endowment period and the balance of insured sum is paid at maturity period.
  • Deferred Endowment policy : Under this policy, after the expiry of specified period, the insured sum is payable to insured person or nominee. The sum is payable only after the end of specified time, so there is no major factor of when the insured died.
  • Joint life Endowment policy : This policy is taken on the life of two or more persons and will mature for payment on the expiry of the endowment period or on the death of any one of the life insured before the endowment period.

3. Term insurance policy

The term insurance policy is used for short term ranging from one year to specified number of years and will nature for payment only on the death of insured within the period, but if he survives, nothing is payable. Following are the types.

  • Ordinary term policy : The ordinary term policy is used for very short period of years and the premium is generally paid in one installment called the straight premium. The insured sum is payable only if death occurs within the term.
  • Decreasing term policy : This policy is issued to the borrowers of money and the amount of policy payable at the end of each year is automatically reduced and equal to the outstanding loan which will be paid if the insured dies before the end of term.
  • Renewal term policy : This policy can be renewed after the expiry of the term without medical examination but a different rate of premium is applicable to the age at the time of renewed.
4. Other life policies
There are other life policies also. Some of there are as follows:
  • Multi purpose life insurance policy which provides several benefit under one insurance contract, such benefits are old age benefits, regular income maintenance, children education, cost benefit, marriage cost benefit etc.
  • Employee life insurance which is taken by the employer to provide security and safety of employee for better performance and productivity.

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