DESCRIBE THE LIFE INSURANCE.EXPLAIN THE DIFFERENT TYPES OF POLICIES.
Ans. The different types of insurance policies available in the market are Life Insurance, Fire Insurance and Marine Insurance Policies. The details are given below:
A) Life Insurance:
Life is full of uncertainties. Necessity to remove such uncertainties led to the need for insurance. Insurance is the provision which a prudent man makes against untoward happenings which may occur by chance. Business is also full of risks. The occurrence of any event which is uncertain is termed as risk. Likewise, these risks can be guarded by means of insurance. Some of the risks can be passed on to specialized institutions which are called as insurance companies..
"A life insurance contract may be defined as a contract whereby the insurer, in consideration of a premium, paid either in lump-sum or in periodical installments undertakes to pay an annuity or a certain sum of money, either on the death of the insured or on the expiry of a certain number of years". Obviously, if a person dies, the payment will be made to representatives of the deceased. If, however, the money becomes due for payment during the life time of the assured, the amount of the policy will be paid to him. Moreover, the assured has to pay a fixed sum by way of premium constantly during the time when the policy is in force.
Life Insurance Policies: Most of the life insurance policies are variations of the two basic types of policies, namely, whole life policies and endowment policies.
Read more :- DEFINE INSURANCE. WHAT ARE THE PRINCIPLES OF INSURANCE ?
1) Whole Life Policy: It is meant to run for the whole term of life of the assured. It is also called an ordinary policy. The assured sum under such a policy becomes due for payment to the beneficiary only after the death of the assured person. This means that the assured has to pay premia on such a policy throughout his life-time. The premium on this type of life policy is, therefore, rather low. It is meant for the protection of family.
2) Endowment Life Policy: It runs only for a limited period or up to a particular age. The policy money becomes due at the end of the period specified in the policy. In case, however, the assured dies before the specified time, the policy money is paid at the time of death. The premia have to be paid till the date of maturity, i.e the time when the policy becomes payable. This type of life policy combines the advantage of investment for old age with that of protection for the assured's family in the event of his premature death. Under pure endowment policies, the policy money becomes payable only if assured survives the endowment term; if he dies before the endowment term, nothing is payable. Under a double endowment assurance, the insurer agrees to pay to the assured double the amount of the insured sum if he lives on beyond the date of maturity of policy.
The details of various life insurance policies offered by Insurance companies are given below
A) Annuity Policy: In this policy, the amount of the policy is paid in the form of annuities for a specified number of years or till the death of the assured.
B) Sinking Fund Policy: Such a policy is taken with a view to providing for the payment of a liability or replacement of an asset.
C)Term Assurance Policy: The amount of this policy is made payable only when a person dies before a certain date or age. In such a policy, generally the premium is low at the outset but rises gradually with the passage of years. It may then be called an "Ascending Scale Policy". If there is a provision in terms of the policy for its conversion into a 'whole life' or 'endowment policy', it may be called 'Convertible Term Assurance Policy'.
D) Double Accident Indemnity Policy: This policy provides that if the insured dies because of an accident, his survivors will get double the amount of policy.
E) Joint Life Policy: This type of policy is taken upon the joint lives of two or more persons. Its amount can be claimed by the survivor whenever one of them dies.
F) Group Insurance Policy: Such a policy may be taken on the lives of the members of a family or of the employees of a business concern.
G) Janata Policy Scheme: Only endowment policies are issued under this scheme. A Janata Policy issued for terms of 10,15 or 25 years provided that the policy should not mature beyond 60 years of age. It can be issued only up to the age of 45 years for a person. 'No medical examination is required in regard to persons aged 35 or below at the time of taking out the policy'. The maximum amount of the policy can be Rs. 1,000 on one's life. No loans are granted on such policies.