Life Insurance Products Life Insurance Products

Life Insurance Products
3 types of life insurance policies

Pure Insurance (Risk Cover): provides life
insurance protection for a specific period of
time
Combination of Insurance + Investments: in
addition to life insurance protection, it also
builds internal cash values
Pure Investments(Annuities): insurer pays
fixed sum of money periodically, while
insurer will give provide regular pension in
return

Pure
Insurance
Term Insurance Plans

Level
term
Decreasing term
Increasing term
Renewable term
Convertible term
Term insurance with return of
premium

Level term: Sum Assured (SA) same
and uniform throughout term of
policy, in case of death anytime
during term, SA is payable.
Decreasing term: Premium remains
constant, but benefit payable
decreases with time: for mortgage
Increasing term: premium and
benefit increases with time, wherein
the increase could be linked to
inflation index or fixed %

Renewable
term: policy is issued for

fixed term, with option to policy holder
to renew without providing proof of
health status
Convertible term: policyholder has option
to convert his term insurance to a
permanent insurance plan without
undergoing medical test
Term insurance with return of premium:
same as level term, except policyholder
on survival gets back full premium paid

Insurance
+ Investments: provide
insurance protection as long as policy
remains in force and it also builds cash
value (surrender value)
Whole life policy
Ordinary
life insurance:
Limited paying life insurance
Endowment Policy
Money Back Policy
Unit Linked Policy

Whole life policy: Cover is provided for your

entire life, regular premiums paid until death,
used more for estate planning
Ordinary life insurance: provides
protection till age 100, constant
premiums throughout life of term,
investment element
Limited paying life insurance: provides
lifetime protection, premiums only for
limited term

Endowment Policy: SA is payable either on

death or on survival at end of policy term, low
returns
Without profit: on maturity/death, SA + loyalty
bonus is paid, loyalty bonus is one time paid as a
% of SA for staying in the plan through its term,
relatively lower premium than with profit
With profit: SA + reversionary bonus is paid(share
of profits declared every year) + loyalty bonus is
one time paid as a % of SA for staying in the plan
through its term. Note that reversionary bonus are
of 2 types: Assured, Non- assured:

Money Back Policy:
Survivor benefit paid periodically (every 4
or 5 years) + maturity benefit if insured
survives. On death full SA is paid to insured.
Unit Linked Policy:
Combination of term and mutual fund,
insured can decide where his premium is to
be invested, on death/maturity either:
1) SA + value of units at the prevailing NAV
is paid to insured OR
2) SA or value of units at the prevailing
NAV whichever is higher is paid to insured

Pure
Investments
Annuities/Pension plans:
Can be immediate annuity or a
deferred annuity plan
Premium can be paid regularly or as
lumpsum one time
Can be traditional policy or ULIP
May or may not offer life cover

Riders:
Special provisions or
group of provisions that may be
added to policy to expand or limit
the benefits otherwise payable.
Policy rider
Benefit rider

Policy
rider: gives additional benefits that

supplement basic benefit of SA
Days
of grace: allows additional grace

time to policy holder to pay premium
Revival of policy: many policies allow
revival of lapsed policy on payment of
outstanding premium along with interest,
some times with medical test also
Non-forfeiture regulation: even if all
premiums have not been paid, but
sufficient premiums paid such that policy
acquires surrender value

Benefit riders: extra benefit by paying

enhanced premium
1. Critical illness cover rider: Additional
cover for risk of contracting critical
illness. Mostly extra cover is equal to
or 50% of SA of policy and is paid on
diagnosis. 80D deduction

2. Medical expenses rider: covers risk
towards hospitalization other than
critical illness. Tax deduction under
80D
Hospital cash benefit rider: SA + daily

compensation (restricted to max of sum
assured). Premium payable depends on
SA + age of insured
Major surgical assistance rider: financial
assistance in case of surgery (20-50%) of
riders SA.

3. Disability benefit rider:
Disability/dismemberment rider: Benefit

on permanent disability due to accident.
Paid in installments to provide a stream
of income.
Waiver of Premium (WOP): gets
activated when policy holder becomes
disabled or unemployed due to injury or
sickness. Premium is waived till he
becomes employed again.

4. Miscellaneous riders:
Accident death benefit: on death due to accident. In

case of death in mass transit system twice the
accident cover is paid, 80C deduction
Level term cover rider: option to increase life
cover in non-term plan upto SA on base policy.
Offers death protection alone, useful when carrying
large debt and to insulate dependents from
financial liability, 80C deduction
Guaranteed insurability option rider: insures ones
insurability at different life stages without
undergoing medical checkup at original premium
rate. Does not qualify for any tax rebate or
deduction
Life Insurance Terms/Concepts

Review of Concepts:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Nomination
Loans on policies
Surrender value
Non-early death claim
Early death claim
Maturity
Contribution clause
Settlement relaxations
Policy revival
Grace period

Loan on policies:
usually
85% of surrender value is given
as loan
Loan can be paid anytime during term of
policy
Interest rates vary as per company
if loan not repaid during term or early
claim, outstanding will be deducted from
claim
If due to non-payment of premiums, if
loan and interest becomes > surrender
value, foreclosure action is taken

Surrender Value:
a policy can be surrendered if kept in
force for atleast 3 years
For bonus eligibility, policy should be in
force for atleast 5 years
Non-early death claim: claim after 3

years from commencement of policy,
minimal documents required
Early death claim: death within 3 years
from commencement of policy,
additional documentation required.

Maturity:
if
the Assured survives policy, then to

claim maturity amount you need to
submit policy document, assignment, if
any, age proof if not submitted earlier
Contribution:
same
policy taken from multiple insurers,

loss occurs, insurers split the claim
amount in proportion to their share

Settlement relaxations:
Within 3 years from date of commencement
no claim acceptable in respect of lapsed
policy or death of the assured Except:
Premium paid for >= 3 years & then not
paid, nominees get proportionate paid up
value.
Event of death <= 3 years & policy under
lapsed position, nothing payable.

If min. 2 yrs premiums are paid and if death

occurs:
Within 3 months from date of first unpaid
premium: full SA with bonus payable
subject to recovery of premium already
fallen due and premium falls during policy
anniversary
Between 3 6 months from fully unpaid
premium: only 50% of basic SA is payable.
No bonus is paid and no arrears of
premium are recovered
6 months 1 year: only notional paid up
value is given

Policy Revival: Can be done within 5
years from date of first unpaid premium.
Five revival schemes:
1.
2.
3.
4.
5.
Ordinary revival scheme

Special revival scheme
Revival by installment method
Loan-cum-revival scheme
Survival benefit-cum-revival scheme
Tax Benefits of Insurance

Section 80C deduction: Upto 1 lac for premium paid
on life of self, spouse, children including adult
children and married daughter,
Section 80D deduction: for medical insurance and all
health riders upto 15000 pa (Rs. 20000 for senior
citizens)
Section 80DDA: <= when contribution of Rs. 40000
for is made for maintenance of a handicapped
dependent (LICs Jeevan Aadhar plan).
Section 10(10D): Any sum received under insurance
policy including maturity bonus etc is exempt. If
annual premium is > 20% of SA on maturity, then
differential between SA & Premium paid is taxable

Life Insurance Products Life Insurance Products

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Life Insurance Products

3 types of life insurance policies