Page 134 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Unit 8: Life Insurance

of the assured within the term of the contract and nothing is paid in case of survival to end of the Notes
term. But in Pure endowment, the sum assured is paid only in case the assured survives to the
end of the term. Nothing is paid in case of death of the assured within the term. Based on these
two basic plans, any number of plans can be devised by combination of these two plans. These
two plans combined in various proportions give rise to all other plans which are called as
Traditional or Conventional Plans.
The various products available in the Insurance market in India based upon about the four
needs like:
1. Death
2. Living to a certain length of time

3. In capacity
4. Injury or incurring a disease.
They are the major needs and occupy prominent position in our Life Insurance planning. Any
other need can be a sub division of these.

Term Assurance

Term assurance is the cheapest form of Insurance. As explained above, this plan of Insurance is
just a Risk Cover plan.

Example: Young people who cannot afford high premiums can go in for this policy and
obtain substantial cover at a very moderate cost.

This term assurance has undergone tremendous modification like:
1. Term assurance: Here sum assured is paid only in case of death of the assured within the
term of the contract. Nothing is payable if the assured survives the end of the term.

2. Term assurance with return of premiums: In this plan, the sum assured is paid in case of
death within the term. But if assured survives the term of the contract, all the premiums
paid are returned.
3. Term assurance with return of premiums and loyalty additions: If the assured survives
the term, in addition to return of premiums, loyalty additions are given. Such additions
may be a percentage of premiums.
4. Term assurance with return of premiums & loyalty additions and extended cover: In this
plan in additions to the benefits under (3), the contract does not come to end, but the
insurer extends term assurance cover for a further period after the end of term. In case of
death of the assured during the extended period, the Insurer pays full or part of the sum
assured. This is ideal plan, whereby the assured can have risk cover at an age when he may
not be eligible for Life Insurance at all.
5. Convertible term assurance: In this plan the assured has a choice of converting the policy
into an endowment or whole life at the end of the term. The option is to exercise before
2 years from the expiry of the term and the Insurer will agree to cover risk for a sum not
exceeding the original sum assured. There is no need to submit any proof of insurability.

Whole Life

Under whole life, by concept the sum assured is payable on death only. Whereas in term assurance,
the death should take place within the term of the contract, in whole life there is no fixed term

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