The investment in Life Insurance is not primarily for the purpose of getting returns on the investment but it is for the cover against unfortunate eventuality that may arise. It is not for the benefit of the person who passes away but it is to guard his family/dependents against the events that could affect them in the unfortunate circumstance of his / her demise.
An endowment policy covers risk for a specified period. Endowment life insurance pays the face value of the policy to the beneficiary on death of the insured person. If nothing unfortunate happens, at the end of the specified period the sum assured is paid back to the policy holder along with the accumulated bonus.
Endowment policy can be described as an instrument of accumulating capital and a protection against the investor's premature death.
Money back also covers risk for a specified period. This type of policy provides periodic payments to the policy holder during the currency of the policy and the balance of the survival amount with accumulated bonus at the expiry of the term of the policy. In case of unfortunate death of the policy holder during the term of the policy, the face value of the policy is paid to the beneficiaries without making any deduction for the periodic payments made to the policy holder during his life time.
A whole life policy runs as long as the policy holder is alive usually requiring the payment of premiums throughout the life. The insured amount and the bonus is payable only to the beneficiary upon the death of the policy holder. There is no survival benefit as the policy holder is not entitled to any money during his / her own lifetime.
These policies are for a specified term but usually without any survival benefits. Therefore, the premium on this type of policies is lower than Endowment or Money back policies. The insured amount is payable to the beneficiary in case of death of the insured person during the term of the policy. No survival benefit is available on expiry of the term of the policy to the policy holder.
These policies are similar to endowment policies and offer maturity benefits to the policy holders apart from covering the risks. The Joint Life policies cover two lives simultaneously and offer unique advantage to a married couple or to partners in a business firm. The sum assured is payable on the first death and again on the death of the survivor during the term of the policy. The sum assured alongwith accumulated bonus is also paid after the death of the survivor. If one or both the policy holders survive to the maturity date, the sum assured as well as the accumulated bonuses are payable on the maturity date. The premiums payable cease on the first death or on the expiry of the policy term, whichever is earlier.
The Group Insurance policies offer life cover to a group of persons. These policies are no survival benefit policies and are usually issued at very low premiums.
An annuity is an investment that is made either in a single lump sum payment or through installments paid over a certain number of years, in return for a specific sum that is received every year, every half-year or every month, either for life or for a fixed number of years.
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