Life Insurance Products
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Term Insurance Product
These are pure life insurance products where the benefit (lump sum) is payable only on the happening of death during the term of the life insurance policy.
These policies cover the risk of dying early and provide a lump sum to the Nominee (usually a Family member) to take care of their future needs.
In case the Life assured survives the Term of the Policy, nothing is payable.
However, there are options available for return of premiums paid in case the Life assured survives the term of the Policy.
These Policies are taken for a fixed term.
Premiums under Term insurance products are relatively the lowest as they do not have any savings component.
This is the cheapest of all the Life insurance policies.
Premium depends upon the age of the life insured.
Higher the age, higher the premium, as the risk taken by the life insurance company increases with age.
Term insurance policies are still not popular as the level of insurance awareness in India is very low.
Generally, Policyholders expect a benefit payable during their lifetime.
Since Term insurance products do not provide any benefit during survival of the Life assured (except for Return of premiums upon survival till the end of the term of the Policy), these products are still unpopular.
Whole Life Insurance Products
As the name suggests, whole life insurance products cover the risk of dying early till the person’s death, as compared to a Term where the risk coverage is available only till the expiry of the term mentioned in the Policy, say 5 years, 10 years, 15 years etc., as chosen by the Policyholder.
Essentially, Whole Life insurance products are extensions of Term insurance products and also provide benefits (usually lump sum) payable only on the death of the life assured.
But the coverage is available through out the life.
However, generally across various life insurance companies, where the life assured attains the age of 85, the Sum assured is paid to the Policyholder if he/she survives age 85.
In case of Participating products, bonuses are also paid.
For the reasons mentioned under Term insurance products, even Whole Life insurance products are also not popular.
Endowment Insurance Products
Under Endowment products, the benefits (Sum assured) are payable either upon death during the term of the Policy or if the Life assured survives the maturity of the Policy, upon maturity of the policy, whichever is earlier.
Therefore, at the end of the Policy term, in case the Life assured survives, the Policyholder gets a lump sum benefit.
In case of Participating products, the Bonuses declared are also paid upon the death or maturity (reversionary bonuses).
Money Back Products
These are extensions of Endowment products whereunder, the Policyholder is entitled to periodic
payouts, if he survives specified terms during the tenure of the Policy.
For example, if the Life assured survives 10 years from the date of taking the Policy, 25% of the Sum Assured shall be paid, 50% at the end of 15 years and the balance on Maturity.
Under these products, the Sum Assured, instead of being paid only upon survival on maturity, is accelerated and paid in installments.
However, in the event of death anytime during the term of the Policy, full Sum Assured is paid, irrespective of the installments that may have been paid already.
Annuity Products
Annuities are periodic (usually monthly) payouts made in consideration of a lump sum amount deposited in the beginning of the Policy.
Annuity products come in handy for Pension Policies which are used to plan postretirement
income.
For example, under the New Pension Scheme run by Pension Funds Regulatory and Development Authority, a member of the Scheme saves money through the Scheme by making periodic contribution which is invested by NPS in market-linked instruments and the corpus grows like a mutual fund.
Upon the member attaining the age of Superannuation, NPS utilizes the entire lump sum (or up to 2/3rds, if the member wants to commute 1/3 of the corpus) to purchase an annuity policy from a Life insurance company.
Thereafter, the Life insurer starts paying an immediate annuity to the purchaser till his/her death (or after his/her death to Spouse etc., depending upon the nature of annuity option).
Linked Life Insurance Products
These are Life insurance products which are a combination of Term insurance plus Investments.
Under Linked insurance products, after deducting the premium towards mortality (risk premium) for covering the benefit payable on death, the Life insurer allocates the balance premium available for investments in market-linked instruments (like Mutual funds) and declares the Net Asset Value of the investment portion.
A life insurer is eligible to deduct charges like Premium allocation charges, Policy administration charges, Fund management charges, etc., for administering and managing the investment portion of the premium.
On death, the Nominee usually gets the Sum Assured + Fund value on the date of death.
However, there are other options available. Upon maturity, usually, only the Fund value is paid.
Variable Life Insurance Products
These are also called Universal Life Products, which provide a guaranteed interest credit (like a Bank account) in addition to Life insurance coverage.
These are in the nature of Deposit-linked-life insurance products.
However, these products are not popular in India.
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Health Insurance Products
Health insurance products cover the risk of hospitalisation and provide financial support upon hospitalisation of the life assured.
There are 2 types of health insurance products:
Indemnity Based Health Insurance Products
Indemnity based health insurance products are sold by Non-life insurance companies and Standalone health insurance companies.
Under these products, the actual amount spent by the Life assured is paid by the Insurance company within the limits of the Sum assured selected.
Either the amount is reimbursed to the Life assured or the amount is paid directly to the Hospital (Cashless scheme) by the Insurance company.
Fixed Benefit Health Insurance Products
Fixed benefit-based health insurance products are usually critical illness insurance policies under which a fixed amount is paid to the Life insured upon proof of hospitalisation and the proof of having spent the money for diagnosis, medicines etc., is usually not insisted.
By definition, Travel insurance is also included in the definition of health insurance products.
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General Insurance Products
Fire Insurance Policies
Fire insurance policies cover the risk of loss arising out of unforeseen fire accidents with the limit of the Sum assured.
These products are more popular in Corporates than with individuals.
They are designed to provide financial protection for property against loss or damage by fire and other specified perils.
Reinstatement value clauses are attached to Fire policies under which the amount payable is the cost of reinstating property of the same kind or type, by new property.
Marine Insurance Policies
Marine insurance policies comprise of Cargo insurance and hull insurance.
Cargo insurance provides insurance cover in respect of loss of or damage to goods during transit by rail, road, sea or air. Hull insurance on the other hand, concerns the insurance of ships (hull, machinery etc.).
Motor Insurance
Motor insurance, as the name suggests, is insurance of motor vehicles and are broadly classified as follows:
Insurance of Motor Vehicles are covered under the Motor Vehicles Act, 1939.
Insurance of motor vehicles against damage is not made compulsory, but the insurance against third party liability arising out of the use of motor vehicles in public places is made compulsory.
Insurance Cover against damage is known as “Own Damages” and against injury or death to a third party is known as “Third Party” claim.
No motor vehicle can ply in a public place without such insurance.
Recently, pursuant to a Supreme court decision, all Insurers are mandated to issue Long term policy for Third Party risks- Three years for new private cars and five years for new two wheelers.
Personal Accident Insurance
The Policy provides that, if the insured shall sustain any bodily injury resulting solely and directly from accident caused by external, violent and visible means, then the Insurance company shall pay to the insured or his legal personal representative(s), as the case may be, a Sum assured under the Policy.
The Policy covers the contingency of death, loss of body parts and Permanent and Temporary disablements.
Liability Insurance
The purpose of liability insurance is to provide indemnity in respect of damages payable under law for personal liability of any nature.
This legal liability may arise under the common law on the basis of negligence or under statutory law (e.g. Public Liability Insurance Act or Workman’s Compensation Act) on ‘no fault basis’, i.e., even when there is no negligence.
Engineering Insurance
Engineering insurance covers the various risks in a manufacturing organisation, especially plants.
The various categories of Engineering insurance are as follows:
(a) Contractors All Risks Policy – designed to protect the interests of contractors and principals in respect of civil engineering projects like buildings, bridges, tunnels etc.
(b) Erection All Risks Policy – is concerned with erection of electrical plant and machinery and equipment and structures involving no or very little civil engineering work.
(c) Marine-cum-erection Policy – concerns with the delivery of the first consignment of plant and machinery at the site of erection.
(d) Machinery breakdown Policy – Insurable property include boilers, electrical, mechanical and lifting equipment.
(e) Contractors Plant & Machinery Policy – Policy given to a Contractor who may be using his plant and machinery at different projects during the course of the year.
(f) Boiler & Pressure Plant Policy.
(g) Machinery Loss of Profits Policy or Machinery insurance indemnify an insured against material damage resulting from breakdown or explosion or collapse of machinery – such damage may also result in business interruption at the Insured’s premises.
(h) Advance Loss of Profits Policy – risk of delay of project due to accidental damage to project materials.
(i) Deterioration of Stock Policy – covers loss due to breakdown of refrigeration.
(j) Electronic Equipment Policy – physical loss or damage necessitating repairs or replacement.
(k) External Data Media – covers cost of replacing damaged external storage media.
(l) Increased cost of working – indemnifies against all additional cost incurred to ensure continued data processing on substitute equipment if such costs are incurred as an unavoidable consequence of loss or damage indemnifiable under material damage section of the policy.
Miscellaneous Insurance
Miscellaneous Insurance products include the following products:
(a) Burglary insurance
(b) Home Insurance
(c) Shopkeepers’ Insurance
(d) Bankers’ Blanket Policies
(e) Jewellers’ Block Policies
(f) Blood Stock (Horse) Insurance
(g) All Risks Insurance Policy – includes jewellery, valuables, antiques, paintings, watches, cameras
etc.
(h) Money insurance – covers the risk of loss of money in transit
(i) Fidelity guarantees – covers the risk of arising out of dishonesty of employees
(j) Television insurance
(k) Pedal cycle insurance
(l) Plate Glass insurance – breakage of plain glass
(m) Neon sign insurance
Rural Insurance
Rural insurance includes the following categories of products:
(a) Cattle Insurance
(b) Sheep and Goat Insurance
(c) Poultry Insurance
(d) Dog Insurance
(e) Silk Worm Insurance
(f) Honey Bee Insurance
(g) Horticulture/Plantation Insurance Scheme
(h) Comprehensive Floriculture Insurance
(i) Agriculture Pump set Policy
(j) Salt Works Insurance
(k) Cycle Rickshaw Policy
(l) Animal Driven Cart Insurance
(m) Gobar Gas Insurance
(n) Hut Insurance
(o) Weather/Crop Insurance