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Life Insurance

  • Liability Coverage Plan
  • Money Back Plan
  • Savings + Free Insurance Plan ( Endowment Plan )
  • Tax Benefit Plan

Which type of policy is best suited for me?

The type of policy that suits you best depends on many factors, such as your insurance objectives, your income, assets, liabilities, number of dependent members in your family and family expense. Life insurance policies are broadly classified in to three categories
» Endowment policies
» Whole life policies
» Pension policies

Endowment policies

Endowment policies cover the insured for a specified period. Thus, the insured may select to insure himself until retirement; e.g. if he is 25 years old, he may choose to insure himself for 35 years, until he reaches the age of 60.
» Upon the death of the insured (during the term of the policy), the nominee receives the sum assured plus the bonus, if any. Bonus is paid for the number of years the policy was in force.
» Upon surviving the term of the policy, i.e. upon maturity, the insured receives the sum assured plus the bonus for the term of the policy, if any. Thereafter, the insured is not covered by the policy.
» Endowment policies are usually more expensive in comparison to whole life policies. Endowment policies are broadly classified into two types - Endowment - Without profit and Endowment - With profit.
» Endowment - Without profit or Term products - offer the nominee the sum assured only, upon death of the insured. Upon surviving the term of the policy or upon maturity, the insured may receive the sum assured or a portion of the sum assured or a refund of the premium only. Typically, such policies are low-cost policies.
» Endowment - With profit policies - offer a bonus (which could be guaranteed) in addition to the sum assured, upon death of the insured or at the end of the term of the policy. These policies cost more than the Endowment - Without profit policies. Currently, four types of Endowment - With profit policies are offered in the market:

Endowment with profit policies

» Upon death of the insured, the nominee receives sum assured plus bonus for the number of years the policy was in force.
» Upon surviving the term of the policy or upon maturity, the insured receives sum assured plus bonus for the term of the policy. The amount receivable upon maturity is tax-free.
» Many people prefer to buy such policies for terms that mature during their retirement period. Often, the maturity amount is utilized to supplement the pension income (pension income is taxable).

Money back policies

» During the term of the policy, the insured receives a fixed portion (percentage) of the sum assured at regular intervals. This money received during the term of the policy is tax-free.
» Upon surviving the term of the policy or upon maturity, the insured receives the balance amount of the sum assured plus bonus for the term of the policy.
» Upon death of the insured, the nominee receives full sum assured plus bonus for the number of years the policy was in force. (Money received by the insured during the term of the policy is not deducted from the amount paid to the nominee.)
» Money back policies cost more than Endowment - With profit policies. Many people prefer to purchase such a policy to utilize the money receivable for going on a holiday, re-furnishing their homes or even re-investing the same amount.

Child Plans

» The child receives sum assured plus bonus (if any) at a pre-determined time. This money is receivable irrespective of the fact that the proposer is dead or alive.
» The proposer for such a policy could be the parent/guardian/grand parent; he pays the premium for the policy.
» In the event of death of proposer, usually no further premiums need to be paid by the family. However, depending upon the policy type, the child may or may not receive the sum assured upon the death of the insured. However, the policy continues and the child receives the sum assured plus bonus, if any, at the pre-determined time of the policy.
» Upon survival of the term of the policy, the child receives money at the pre-determined time.
» Such policies are best suited for planning children’s higher education and marriage expenses.

Unit-linked Insurance Plans

» A portion of the premium is invested in the stock market or in a mutual fund. Thus, the returns earned on such a policy are transparent (unit-linked) since they can be tracked on a daily basis.
» The company utilizes balance part of the premium to cover insurance and administrative costs.
» In the event of death of insured, the nominee receives sum assured plus returns earned in the market by the insurance company.
» Upon surviving the term of the policy, the insured receives the returns earned in the stock market by the insurance company.

Whole life Plans

Whole life policies provide insurance until the death of the insured person.
» Upon the death of the insured, the nominee receives the sum assured plus the bonus, if any.
» Whole life policies typically offer no survival benefits, since there is no definitive term to the policy. However, the insured could make withdrawals or take loans against the cash value of the policy.
» Typically, the cash value (the interest or bonus earned on the premium) of a Whole Life policy is higher than that of an Endowment with Profit policy.
» Moreover, the premium for a Whole Life policy is paid for a longer duration of time (since the insurance coverage term is longer). However, the insured has the option of selecting the premium paying term.

Pension Plans

» Pension policies provide a regular sum of money to the insured or to his nominee for a fixed period.
» The insured has the option of selecting when and for how long (term) she or he would like to receive the pension amount.
» In the event of death of the insured during the term of the policy, the nominee has the option of taking a lump sum amount or receiving a regular pension for the remaining term of the policy.

It is advisable to have a portfolio of policies with varied benefits, as a single policy cannot meet all your insurance objectives.


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