Page 149 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes 4. Whole Life Single Premium Plan: Single premium is paid at the start of the policy. The
policy is available both, with and without profits.
5. Convertible Whole Life Plan: The plan is useful to the young persons who are at the start
of their careers and their present income is low. The object is to provide maximum
protection at minimum cost. It is a whole life without profit plan, premiums payable upto
the age of 70 years of the assured. The premium charged is that of whole life without
profits and therefore sufficiently low. The risk is however covered for the full sum assured.

After 5 years, the life assured is given the option to convert it into an endowment plan
with or without profits choosing the term without having to go in for a medical
examination. If no option is exercised at the end of 5 years, the policy continues on its
original terms as whole life without profits with the premiums ceasing at the age of 70
years.
6. Money Back (with profits) Scheme: These are fixed term policies. The premium is paid till
the end of the term or till the death of the policyholder, whichever is earlier. A part of the
sum assured is returned to the policyholder once in 5 years or 4 years according to the
plan.

The risk cover continues for the full sum assured even after the payment of installments to
the policyholder. The bonus is also payable for the full term.
7. Children’s Deferred Assurance Plan: This plan enables a parent or a legal guardian or a
relative of the child to provide a sum for the child by way of a very low premium. It is an
endowment assurance plan with profits, the risk for which commences at a selected age.

The policy is in two stages, one covering the period from the date of commencement of the
policy to the deferred date (the date of commencement of the risk on the child’s life) and
the other covering the period from the deferred date to the date on which the policy
emerges as a claim either by death or on maturity of the policy. A combined policy is
issued covering both the stages.
8. Premium Waiver Benefit: By payment of an additional premium, the proposer (insured)
can secure the benefit of premium waiver. The premiums from the date of his death to the
end of the deferment date are waived of.
9. Pension Plan/Annuity: The pension plans provide for regular payment of money at a
certain age in the form of monthly pension when premiums have been paid in a life policy
for specified number of years.
10. Mediclaim Policy: Medical expenses have become too high. Injury or disease does not
come with prior notice. The requirement of quality medical care has generated the market
for health care insurance policies.

8.7.2 General Insurance

When the insured pays the premium and the insurer accepts the risk, the contract of insurance is
concluded. The policy issued by the insurer to the insured is the proof of the contract between
them.

We know that no contract is valid without a consideration. In case of insurance contracts, premium
is the consideration from the side of the insured and the promise to indemnify is the consideration
from the insurer.
Both the parties should be competent enough to contract and must give the consent for the
insurance contract for covering the same risk for same peril in the same sense. Insurance contracts
which are against the public policy are not valid contracts. Care should be taken by both sides

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