Learning Objective Life Insurance Products

Learning Objective LIFE INSURANCE PRODUCTS

Products • • • • • • •

Term Plans Whole Life Plans Endowment plans Money back plans Annuity plans Juvenile plans ULIP

Term plans • Protection for a limited period • If not renewed protection expires. • These policies have no cash value or saving element neither any loans. • Nothing is paid in case of survival

Term plans • Issued for 10,15 or 20 years • Most affordable –initially premiums are low but at later age tend to shoot up.It is cost of pure protection. • Single premium products also available.

Term plans • Decreasing Temporary Assurance policy is used in housing loans,also called Mortgage redemption Assurance policy. • Here,SA is is equal to the outstanding loan at any point of time,which becomes payable if death occurs during the currency of loan.

Term plans • Many people do not find them attractive and hence companies have come out with additional benefits like riders,ELC with 50 % of SA and also return of premiums if the assure survives the policy term.

Whole life plans • Provides Sum assured in the event of death,whenever that may occur. • Companies limit the age to 100 or less or the premium paying term is limited,say 40 years-Limited payment policies. • Policies can be with or without profits • Single payment also available.

Whole life plans • Can be available with option to convert say endowment plan with in specified period mentioned in plan(not later than 2 yrs before expiry)..Term plans also give this option. • Advantage is in conversion proof of good health not required.

Whole life plans • Companies have started giving option of collecting SA and bonuses at the specified term or when the premium paying term stops, whichever is later. • Cash values are available on surrendering the policies and loans are also available.

Endowment plans • Pure endowment plans are exactly opposite of term plans,where in benefits are paid to policy holder only on survival.This is merely a financial provision and the insurance aspect is absent. • Endowment plans provide for SA to be paid in the case of death during the term and if insured survives,survival benefits are paid.

Endowment plans • Premiums can be single as well as less than the term of the plan • Endowment is nothing but mix of pure endowment & term plan.

Money Back policies • Unlike endowment plans here the survival benefits are paid in the form of partial & periodic payments,of course so long as the policy holder is alive. • For example,for a 20 years money back policy 20 % of the sum assured becomes payable each at 5,10 & 15 years and 40 % plus bonus payable at the 20 th year.

Money Back plan • Most important feature of this plan is that in the event of death,at any point of time during the term of policy if death occurs, full value of the sum assured is paid with out deducting the survival benefits already paid. • These are more of investment plans than insurance

Annuity Plans • Annuity is a periodic payment during a fixed period. • The purpose of annuity is to protect against a risk of outliving.This is quiet opposite to life insurance which is protection against loss of income due to premature death. • Person receiving annuity is called annuitant

Annuity Plans • Basically annuity plans provide for pension • Two types of annuity plans are available. • Immediate annuity-here the annuity starts immediately after one payment interval from the purchase.This is done by single premium

Annuity Plans • Deferred Annuity-here the annuity starts after more than one payment interval.The annuity is being deferred and hence the name. • It can be purchased either by single premium or periodic premium. • Premium paying phase is called accumulation phase.The age when annuity or pension starts is called vesting age.

Annuity plans • Policyholder has the option to choose from 5 different annuity options• Life Annuity • Life Annuity with RPP • Life Annuity guaranteed for 5/10/15 years & life thereafter • Joint life survivor with RPP • Joint life survivor w/o RPP

Juvenile Plans • Insurance can be taken on the life of children, who are not majors.The proposal to be made by parent or guardian. • The risk of life of child is covered only at specified age ( diff for diff plans/insurers) and below that age period is called deferment period.Only a % of death benefit could be given in this period.

Juvenile plans • The title would automatically pass on to the insured child ,on his attaining the majority.This process is called vesting. • Other children’s plan are in the form of endowment or money back plans with parent being sum insured.

ULIP’S • ULIP’S plans are very transparent and flexible at the same time. • Insured can get all the details of charges and also decide upon the investment options. • This is more of investment product than insurance.Because major portion of premium goes for investments. • PREMIUMS=CHARGES(PAC+PMC+FMC+MC )+UNITS ALLLOTED.

ULIP’S • Min SA= Premium * Term / 2 • Person can opt for more as flexibility to choose is there,further one can choose 0 death benefit in pension plan. • Units are offered on NAV calculated daily.Few companies allot at Bid-offer spread. • Choice of investment in to different funds depending on insured’s risk profile.

ULIP’S • Funds are Aggressive,balanced or conservative. • Aggressive with max exposure to Equity & min to debt • Conservative-More of debt & less of equity • Balanced….is on balance as name suggests. • Switches are allowed –free & charges.

ULIP”S • One has complete flexibilty to put all funds in one fund or or in a mix ( in any ratio) of funds. • Cover continuous option • Bonus,partial withdrawl,surrender and riders available. • Plans for maturity benefits,pension(annuity) and children are available.

Joint Life Plans • Two or more lives can be covered under one plan,generally for married couples or partners. • The SA is paid on the death of any one insured or end of term.Some plans provide SA on death of one insured and continue to cover 2nd insured with out payment of future premiums.

Joint Life Plans • A joint life declaration is necessary to create joint life interest in the policy. • In partnership insurance deed would be examined to ascertain nature of interest. • Each life would be underwritten separately • Bonus accrue on basic single SA.