Important Life Insurance Policies in India
Here we have given the list of Important Life Insurance Policies in India for the upcoming LIC AAO Exam.
Depending on their objectives, there are at least three types of life insurance policy classifications.
- A life insurance policy could offer pure protection (Term Plans)
- Another variant could offer protection as well as investment (Insurance-cum-Investment Products)
- Some others could offer only investment (Investment Products)
Pure Insurance Products
Term Plans:
- Cheapest insurance & Covers only the risk of your dying
- You pay premium year on year to the insurance company and if you die, the insurance amount, called the Sum Assured, is paid out to the nominees. If you survive, you don’t get anything and lose the yearly premiums you paid.
- The premium for such policies will obviously be more as compared to pure term plans.
Insurance-cum-Investment Products
As the name suggests, these are plans that provide insurance and along with it return on investments.
Endowment Plans: Take a term plan and add an offer of some returns on the premiums you pay – that is an endowment policy for you. If you survive the policy term, you get the sum assured plus the returns and if you die during the policy tenure, you still get the sum assured plus some returns. To get these returns along with the life cover, you end up paying more premium.
With-profit endowment plans: These plans share the profits the insurance company makes each year with the policyholder. So they offer more returns than without-profit endowment plans and are more expensive as well – that it, for all parameters considered same, the premiums will be higher than without-profit endowment plans.
Without-profit endowment plans: These plans do not participate in the profits the insurance company makes each year. Apart from the sum assured, you could possibly get a loyalty bonus, which is a one-time payout made in appreciation of your sticking to the insurance company.
Whole-life plans: Term plans, endowment plans and money back plans offer insurance cover till a specified age, generally 70 years. Whole-life plans provide cover throughout your life. Usually, the policyholder is given an option to pay premiums till a certain age or a specified period (called maturity age).On reaching the maturity age, the policyholder has the option to continue the cover till death without paying any premium or encashing the sum assured and bonuses.
Money-back plans: Money-back plans are variants of endowment plans with one difference – the payout can be staggered through the policy term. Some part of the sum assured is returned to the policy holder at periodic intervals through the policy tenure. In case of death, the full sum assured is paid out irrespective of the payouts already made.
Unit-linked insurance plans (ULIP): ULIP give you greater control on where your premium can be invested. Think of them like mutual funds. The annual premium you pay can be invested in various types of funds that invest in debt and equity in a proportion that suits all types of investors. You can switch from one fund plan to another freely and you can also monitor the performance of your plan easily. There are various charges to be aware of in a ULIP and is suitable for those who understand the stock market well. Of late, ULIPs qualified as the most abused insurance plan.
Investment Products
Pension Plans:
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Investment options that let you set up an income stream in your post retirement years by giving away your savings to an insurance company who invests it on your behalf for a fee.
- The returns you get depends on a host of factors like how much you contributed and when is it that you started, the number of years when you want the money to come to you and at what age that starts.
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When you buy the pension plan contract, if the payment to you (called annuity) starts immediately it is called an immediate annuity contract. However, if the payout starts after some years of deferment, it is called a deferred annuity.
Good to read: Important Insurance Abbreviations Part I & II
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