Types of life insurance policies

TYPES OF LIFE INSURANCE POLICY

What are the different types of life insurance policies?

Life assurance contracts available are many and the basis of all these policies can be found under the following headings :

Terms Insurance:

This is the simplest and oldest form of insurance and provides for payment of the sum assured on death, provided death occurs within a specified term. Should the life assured survive to the end of the term then the cover ceases and no money is payable. This is a very cheap form of cover and is suitable, for a young married man who wants to provide a reasonable sum for his wife in the event of his death. It can also be used for a variety of specific purposes such as business journeys.

Whole Life Insurance:

The chosen sum assured is payable on the death of the assured whenever it occurs. Premiums are payable throughout the life of the assured until retirement of the assured. Although premiums may cease at, say, age sixty, the policy is still in force. Should the person die at age seventy-five, the policy would provide the benefits for his widow or family.

Endowment Insurance:

The chosen sum assured is payable at the end of a given term of years or upon earlier death. These contracts are taken out as savings plans for the future with the added attraction of life cover. Endowment contracts will always be popular because each proposer earnestly hopes that he will live to the end of the term and spend the proceeds himself.

Annuities:

When a person has a reasonably large sum of money and wants to provide an income for himself after he retires, or at some other time, he can approach a life assurance company and purchase an annuity. The annuity may start at once, when it is called an immediate annuity, or may start at some date in the future (a deferred annuity). Regardless of when it starts it can take various forms. It may provide an annuity for the life of the person, the annuitant, or it may be payable irrespective of death for a certain period, as in the case of the “annuity certain.” The guaranteed annuity is similar in that it provides the annuity for a guaranteed period and thereafter until the annuitant dies.

Pension Schemes:

These schemes are designed to provide an income at retirement. So far as insurers are concerned they may be asked to arrange a scheme, rather than a firm doing all the work itself. This involves collecting the premiums, investing them and paying pensions to retired people. Many schemes are endowment policies with group life insurance cover to provide benefits, should the death of a member occur before retirement age, but there are different ways in which this can be done.

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