IC-33 Chapter-5 : Life Insurance Products I

Overview of life insurance products:

Life insurance is an intangible product where the customer is made to understand feature and returns of it. Life insurance products offer protection against the loss of economic value of an individual’s productive abilities. it is a financial product used for protection against death and disease. Benefits of a basic insurance policy can be increased by taking riders.

A rider is a provision typically added to basic policy in order to increase benefits such as accident cover rider, premium waiver rider, critical illness rider, and disability income benefit rider.

A) Traditional life insurance products:-

I) Term insurance plan: – it is the simplest form of insurance plan to offer only death cover .In the event of premature death of the policy holder it provides income to the family. A term insurance plan covers only death and cheapest insurance plan available in market. Term insurance plan can be converted to whole life plan but the new premium will be higher. Term insurance plans death cover can be increased or decreased during the term of plan. Term insurance plan does not provide any amount on maturity.

II) Whole life plan: – whole life plan are permanent life insurance policy which has no fixed term, the policy holder received money when the death occurs. Premium of whole life plan is very high. Whole life insurance in develops saving and creates wealth for the next generation.

III) Endowment assurance: – it is a combination of two plans; term assurance plan and a pure endowment. Thus this plan has both death and survival (maturity) benefit. Endowment plans are bought in order to meet Certain purpose such on Children’s education, marriage etc. Money back policy, children policy etc. are some variations of endowment insurance policy.

B) Par and Non-Par Schemes: – participating policy are the one where the profit earned by the insurer on investment done is distributed back in the form of bonus. Money back, whole life etc. are par schemes. Non-participating policy are the one where the policy holder are not entitled to participate in the profits of the insurance company. They are also known as “without- profits plan”. Term insurance pain is non-par scheme policy.