Life insurance policies and

classifications
LIFE INSURANCE

Life insurance is a contract

between an insurer and a
policyholder in which the
insurer guarantees payment of
a death benefit to named
beneficiaries upon the death
of the insured.
BENEFITS OF LIFE INSURANCE
1. Risk Coverage: Insurance provides risk coverage to
the insured family in form of monetary compensation
in a premium paid.
2. Difference plans for different uses: Insurance
companies offer a different type of plan to the insured
depending on his need for insurance. More benefits
come with the more premium.
3. Cover for Health Expenses: These policies also
cover hospitalization expenses and critical illness
treatment.
4. Promotes Savings/ Helps in Wealth
creation: Insurance policies also come with the saving
plan i.e. they invest your money in profitable
ventures.
 Types of Life Insurance Policies

Annuity/
Term Unit Linked Money Back Whole Life Pension
Endowment Policy
insurance Insurance Policy Plan
policy
plan Plan
TERM INSURANCE PLAN

• Term paper – pure risk

cover
• A term plan provides death
risk cover for a specific
period.
• It is a pure risk cover plan
that offers high coverage at
low premiums
Example
An individual non Age 25 years
smoker male is looking
for a term life plan of Term 40 years
appx Rs.6800 to
Rs.10,500 per year Sum assured Rs. 1 crore
UNIT LINKED
PLAN
• Insurance + investment
policy Term 20 years

• The premium paid is partly

used as risk cover and partly Annual Rs. 20,000
premium
used as investment in funds
• One can invest in different Sum assured Rs. 2,00,000

funds offered by insurance

company depending on the
(Annual premium depends
risk upon the fund value at the
time of maturity)
 Retirement plan
• Retirement plan helps
one to build corpus for
their retirement.
• Helps to live
independently financially
without worries
• It is long term savings and
retirement planning
CHILD PLAN

• It helps to build a corpus

for child’s future growth. Term 20 years
I.e., it build’s fund for
child’s education and Annual Rs. 1,00,000
marriage. premium

• Most of the child plan Sum assured Rs. 18 lakh

provides annual
installments or one time
payment after the age of
18 years.
(Annual premium depends
upon the lump sum payouts
on regular interval )
Whole life insurance
• Covers the life assured for
whole life, or in some cases,
up to the age of 100 years.
• If the life assured outlives the
age of 100 years, the
insurance company pays the
matured endownment
coverage
• The premium is high when
compared to term plans.
UNIT LINKED
PLAN
• Insurance + investment policy
• The premium paid is partly used as Term 20 years
risk cover and partly used as
investment in funds
• One can invest in different funds Annual Rs. 20,000
offered by insurance company premium
depending on the risk
Sum assured Rs. 2,00,000

(Annual premium depends

upon the fund value at the
time of maturity)
Premium calculation
1) Decreasing payouts

The size of your premiums depends on whether

you choose to have a fixed level for duration of
policy.
Eg., if the life insurance is designed to cover your
mortgage then the balance of your outstanding loan
will fall under every year as you make.
LENGTH OF COVER
If you choose a life insurance policy that covers you
until you die then your premiums are likely to be
higher than if you opt for term insurance.
YOUR OWN HEALTH
If you have any existing health problems when you
sign up for life insurance, then the cost may likely
push up.
Life style factors may also push your premium.
Eg., if a person is smoker, or if he is overweight ,
risky occupation.
CRITICAL ILLNESS

Including cover for such serious health

problems will also increase the size of your
monthly premiums. Adding critical illness
cover can be very expensive and especialy for
people over 60 years or those pre- existing
medical conditions.