Other types of Life Insurance

The life insurance policies are of many types. The principal types of policies are
discussed below:
(1) Whole life Policy :
Under this policy premiums are paid throughout life and the sum insured becomes
payable only at the death of the insured. The policy remains in force throughout the
life of the assured and he continues to pay the premium till his death. This is the
cheapest policy as the premium till his death. This is the cheapest policy as the
premium charged is the lowest under this policy. This is also known as ‘ordinary life
policy’. This policy is suitable to persons who want to provide for payment of estate
duty, make bequeathments for charitable purposes and to provide for their families
after their death.
(2) Limited payment life policy :
In the case of whole life policy there is one disadvantage in that the assured must
continue to pay the premium even during his old age when he is no more employed.
Under the limited payment life policy premiums are payable for a selected number of
years or until death, if, earlier. The assured knows how much he will be required to
payable only at the how long he lives. The sum insured becomes payable only at the
how long he lives. The sum insured becomes payable only at the death of the insured.
It is a suitable policy to meet the family needs.
(3) Endowment policy :
It runs only for a limited period or up to a particular age. Under this policy the sum
assured becomes payable if the assured reaches a particular age or after the expiry
of a fixed period called the endowment period or at the death of the assured
whichever is earlier. The premium under this policy is to be paid up to the maturity
of the policy, i.e., the time when the policy becomes payable. Premium is naturally a
little higher in the case of this policy than the whole life policy. This is a very popular
policy these days as it serves the dual purpose of family and ole age pension.
(4) Double endowment policy :
Under this policy the insurer agrees to pay to the assured double the amount of the
insured sum if he lives on beyond the date of maturity of the policy. This policy is
suitable for persons with physical disability who are otherwise not acceptable for
other classes of assurance at the normal tabular rates. Premiums are to be paid for a
selected term of years or until death, if earlier.
(5) Joint Life Policy :
This policy covers the risk on two lives and is generally available to partners in
business. Policies are however, issued on the lives of husband and wife under
specified circumstances. Sum assured becomes payable at the end of the selected
term or on the death of either of the two lives assured, if earlier.
(6) With or without profit policies :
Under the “with profit or participating policies,” the policy holder is allowed a share
in the profits of the corporation in the form of bonus and it is added to the total sum
assured and paid at the time of maturity of the policy. In the case of ‘without profit
or non-participating policies, no such profit is allowed. Premium in the first case is
higher and is lower in the later case.
(7) Convertible whole life policy :
This policy initially provides maximum insurance protection at minimum cost and
offers a flexible contract which can be altered at the end of five years from the
commencement of the policy to an endowment insurance.
(8) Convertible term assurance policy :
This policy meets the needs of those who are initially unable to pay the larger
premium required for a whole life or endowment assurance policy but hope to be
able to do so within a few years. It would also enable such persons to take final
decision at a later date about the plan suitable for their future needs.
(9) Fixed term (marriage) Endowment policy & education annuity policy :
It is a policy suitable for making provisions for the marriage or education of children.
Premiums are payable for a selected term or till prior death. The benefits are payable
for selected term or till prior death. The benefits are payable only at the end of
selected term. In case of the marriage endowment, the sum assured is paid in lump
sum, but in case of the educational annuity, it is paid in equal half-yearly installments
over a period of five years.
(10) Annuities :
It is a policy under which the insured amount is payable to the assured by monthly
or annual installments after he attains a certain age. The assured may pay the
premium regularly over a certain period or he may pay the premium regularly over a
certain period or he may pay a lump sum of money at the outset. These policies are
useful to persons who wish to provide a regular income for themselves and their
dependants.
(11) Sinking fund policy :
Such a policy is taken with a view to providing for the payment of liability or
replacement of an asset.
(12) Multipurpose policy :
This policy meets several insurance needs of a person – like provision for himself in
old age, income for his family and provision for the education, marriage or the start
in life of his children. It gives maximum protection to the beneficiaries in the event of
the early death of the assured, as it provides :
i) Regular monthly income during the unexpired term;
ii) Additional monthly income for a period of two years from the date of death;
iii) Payment of a part of the sum assured on death and
iv) Payment of the balance sum assured at the end of the selected period
On maturity the assured may get the sum assured in cash, in the form of monthly
pension, or an increased sum payable on death. Premiums are payable during the
selected term or till death, it earlier.