Please follow this blog give details of various plans of insurance in very general terms. All insurers do not offer all the plans. The same plan may be called by different names by different insurers. It is not possible to give details of all the plans offered by the insurers, mainly because the variations between insurers are plenty. Also insurers make changes in their offers or practices from time to time. Even if a reference is made to a plan of any particular insurer, the accuracy of the information is not to be taken for granted.
#Term Assurance Plan
The information form of assurance is the term assurance plan. Under this the SA is payable on the death of the insured during the specified period. If death does not occur, there is no payment from the insurer. The SA may be kept constant throughout the period, or be made to increase or decrease during the period. Decreasing term assurance would be appropriate as collateral to cover the outstanding loans in mortgage transactions. Term assurance, by them, is not very popular, as there is no saving content. Surviving policyholders feel that they got nothing out of the policy. They are useful when only death cover is required and other arrangements are available for survival benefits. Term assurances form part of linked policies.
#Whole Life Plan
Reference has been made in an earlier blog to the whole life and the endowment plans. In a whole life plan, the SA becomes payable only on death whenever it may occur. But unlike a term assurance plan, some payment will be made at some time. Although, in the case of whole life policies, the SA is payable only on death, some insurers pay the SA, when the life assured completes say, 80 years. In an Endowment plan, the SA is payable on survival to the end of the term or on earlier death.
#Limited Payment Policies
In both whole life and endowment plans, the premium would normally be payable till the SA becomes payable, that is, till a claim arises. Premium can also be made payable for a shorter period. Such policies would be called limited payment policies. If the limited period is only one year, a single premium would be payable at the beginning of the policy. Single premium policies for whole life and endowment plans are rare, but are offered. Persons, who expect that their professional earnings may not continue for a long time till say, retirement like regular office workers, may prefer limited payment policies. Performing artistes and even professionals working abroad, run this risk. Sometimes, officers serving in the armed forces may have to retire before they reach the normal retirement age of 55 or more.
#Whole Life and Endowment Policies
Both whole life and Endowment policies can be made participating in profits at option of the policyholder. If that is done, the benefits of bonuses declared after every valuation, will be available under the policy. The methods of bonus additions are dealt with in an earlier blog.
#Anticipated Endowment Plans
The amounts payable on death and on survival need not be the same in Endowment policies. A number of variations are possible. Survival benefits can be more than the death benefits or vice versa. Survival benefits may be paid at intervals during the term, without affecting the SA payable on death. These are the Anticipated Endowment plans, also called money back or money saver plans. There are some Endowment plans under which, a death benefit is available after the last survival benefit is paid at the end of the term of the policy.
#Term Assurance Plans With Return of Premium
Insurance give fancy names to their plans. They do not always suggest the exact nature of the plan. They are often meant to attract attention. For example, offers are made of term assurance plans with return of premium, if the insured survives the term. This is in effect an endowment policy with the SA on survival being “All the premiums paid” instead of a fixed sum, which could be more than “All the premium paid”. Some companies offer whole life plans and offer the payment of SA at the end of the term. It would be advisable to avoid forming conclusions about the benefits offered by any plan, from the name given to it. The terms and conditions must be read carefully to understand the benefits offered and whether it meets the proposer needs.
#Marriage Endowment Plan & Educational Annuity Plan
A marriage endowment plan had nothing to do with the contingency of marriage. It only stipulates the date on which the SA will be paid, even if the life insured dies early. That date can be chosen to coincide with the age of a son or daughter, for whose marriage the SA would come in handy. The same policy can be taken to meet any other liability expected to arise on a future date. Similarly, the Educational Annuity plan is not an Annuity. It is an ordinary endowment plan, which states that the SA would be paid in installments, commencing from a date, which may be chosen as the likely date when the child may be old enough for higher education.
#Term Assurance Plan For A Specified Term
An interesting plan is a term assurance plan for a specified term, at the end of which the premiums paid till then are refunded, but cover continues indefinitely thereafter. To a layman, this looks like a free cover being granted gratis. In effect, the premium is calculated in such a way that the interest accumulated on the premium during the term, is enough to meet the single premium cost of the extended cover.