Life Insurance Endowment Policies

The endowment policies can be several, of which important endowment policies are discussed below:

1. Pure Endowment Policy

The sum assured is payable on the life assured’s surviving the endowment term. In the event of his death within the term (endowment) , premiums may be returnable or not.

In corporation, all premiums paid, without any deduction, will refunded to. Thus the pure endowment policy is opposite of the term policy, because the insured is paid if he survives in pure endowment and if dies with, in the term in term policy.

Actually, these two policies, i.e., pure endowment and term policies, are the bases of all other policies. Pure endowment is for the benefit of the policy-holder and term policy is for the benefit of others.

So, the pure endowment policy has the element of investment and term policy has the element of protection. Pure endowment grants protection against ‘living long’ while the term policy grants protection against living too short.

The former is old-age protection while the latter is family protection.

This policy can be issued in the life of adult as well in the life of child. In the case of a policy effected on the life of a child payment of premiums does not cease on the death of the proposer but must be continued during the whole currency of the policy.

Paid-up and surrender values are allowed on this policy. The mode of payment of premium under this plan is only yearly or half-yearly.

This policy is useful to the person who does not care to present himself for medical examination. This is also beneficial to those who, for reasons of health, would be unacceptable for life insurance on standard premium. It is a sort of compulsory saving for old age.

2. Ordinary Endowment Policy

This is the policy which actually represents the life insurance in true sense. It provides an ideal combination of both the family protection and the investment.

It is taken out for a specified term of years, the sum assured being payable either on the life assured’s death during the period or on his surviving to the end of the period.

Premiums are payable throughout the term of the policy or to a limited period or till the period of death of the life assured.

Ordinary endowment policy is the combination of term insurance and of pure endowment. So, the net premium rate for an ordinary endowment policy is equal to the net premiums of term and pure endowment policies issued at the same age, for the same period of time.

This provides solutions to various problems of life whether living too short or too long.

In other words, the old age provision and the family protection is possible by purchasing only this single policy. Moreover, compulsory saving is possible due to this policy which is not present in other types of savings. It is a means of hedging against the possibility of saving period being cut short by death.

The next advantage of this policy is to meet the marriage; education or other requirements of the family.

3. Joint Life Endowment Policy

This policy covers more than one life under a single policy. Under this plan, the sum assured is payable on the expiry of the term or on the death of one of the assured lives during the endowment period.

Premiums are payable throughout the endowment period or till the prior-death of anyone of the lives assured. The premium is calculated with certain modification according to the age of all insured partners. Paid-up and surrender values are payable on the policy.

This policy is suitable to partners of a firm because firm will not discontinue on the tremendous outflow of the funds at the death of a partner.

This policy is also beneficial to a couple. The practice of granting insurance to husband and wife under this plan was withdrawn in 1960; but it has again been reinstated. The ceiling on the sum to be assured will be determined by the earned income on the wife or the husband whichever is less and also taking into account the previous insurance held on that life.

4. Double Endowment Policy

Under this policy, if the life assured dies during the endowment period, the basic sum assured is payable and if survives to the end of the term, double of the sum assured is paid.

Premiums are payable throughout the endowment term or till the prior death of the life insured.

The premiums, are generally quoted according to the endowment period, irrespective of the age at entry subject to the provision that maturity age is not beyond 65.

The term policy is ranging from 10 years to 40 years but no policy is insured to mature at an age exceeding 65 years. This policy is combination of endowment insurance and a pure endowment (without return of premiums) for the same period and for the same amount.

This plan is beneficial to the person who by reason of some physical disability is not eligible for acceptance at the tabular rates under any of the other classes of insurance.

This is also to benefit to those who are confident of living long but would like to have some cover in the event of his early death. The investment element is higher than the protection element in this plan.

5. Fixed Term (Marriage) Endowment Policy

Under this plan, the sum assured is payable only at the end of a stipulated period, but the premium ceases if death of the policy-holder occurs earlier.

In such an event the policy will remain fully paid until the maturity date but the beneficiary may discount the policy before maturity. This plan is issued on without profit basis, paid-up values are paid under this policy.

This policy is designed to meet the needs of a family man who wants to make available a certain sum for marriage of a female dependent.

6. Educational Annuity Policy

Like marriage endowment policy, this policy is also taken out on the life of the father or guardian who undergoes medical examination. The child for whose benefit (education) policy is taken is called beneficiary.

The difference is that the sum assured is not payable in, a lump sum but is payable, in equal instalments over a period of five years.

It is payable in half-yearly instalments for five years.

7. Triple Benefit Policy

This policy is a combination of a whole life limited payment and a pure endowment (without return of premium) with a guaranteed annual bonus payable on death during the endowment term.

This policy is granted for fixed terms of 15, 20 or 25 years.

Premiums are payable throughout the term or till prior death of the life assured.

The special feature of the plan is that there is a guaranteed and steadily increasing family provision during the selected period along with the old age benefit.

The provision for the family does not terminate when the old age benefit is paid at the end of the period and no further premiums are payable thereafter; but a sum equal to the original sum assured still remains to be paid on the death of the life assured thereafter.

The following benefits are guaranteed provided the policy remains in force for the original sum assured.

A. If death occurs within the stipulated period

The benefits payable to the dependents, in this case, are:

(i) The basic sum assured, and
(ii) A guaranteed bonus per annum equal to Rs.25/- per Rs.1,000 sum assured for each full year’s premium paid excluding the first year’s premium.

This is a non-participating scheme where under the sum assured increases by fixed amounts during the term. The amount of guaranteed bonus is fixed and does not defend on the profits of the insurer.

B. On surviving to the Selected Term

The following amounts are paid at the survival of the life assured at the selected term:

(i) The basic sum assured in cash, and
(ii) Actually paid-up whole life insurance for a like amount payable at death thereafter.

However, this life assured is given the following options in lieu of these two benefits:

An increased cash payment

Or,

fully ‘paid-up whole life policy for an increased sum assured.

The alternative benefit of an increased paid-up assurance will be allowed medical examination subject to the exercise of this option not less than three years before expiry of the selected term.

Paid-up values are also given in this case. The benefits available under the policy on maturity will also be reduced in the same proportion. The policy so reduced will thereafter be free from all liability for payment of premiums but shall loose all rights to the guaranteed additions assured in the event of death subsequent to the date of the conversion into a reduced paid-up value.

Guaranteed surrender value is applicable to this policy.

The plan is useful to a person who, in addition to providing cover for his family, wants to make some provision for his old age. It overcomes the main drawback of the whole life policy, i.e., the assured is permitted to get the policy amount. The other advantage is that the insurance element is greater than in an ordinary endowment assurance policy.

8. Anticipated Endowment Policy

This policy is similar to endowment assurance except that a part of the sum assured is paid at certain interval before death within maturity of the policy and the balance of the sum assured is payable at maturity.

In the event of death at any time during the term of the policy, i.e., before the maturity date, full sum is assured is payable without any deduction of installments paid earlier. The policy may be issued both under with and without profit plan.

The term may be 15, 20 or 25 years.

The payment of policy amount by the corporation is as below:

1. 1/5th of the sum assured becomes payable on the life assured’s surviving, 5, 10 or 15 years according as the selected term of insurance is 15, 20 or 25 years.

2. Another 1/5th of the sum assured on his surviving 10, 15 or 20 years according as the selected form of assurance is 15, 20 or 25 years; and

3. The balance 3/5th of the sum assured on his surviving the selected term of years.

But in the event of death at any time within the selected term the full sum assured is payable without any deduction or adjustment for amount that may have been paid earlier by way of survivance benefit. The LIC has discontinued this policy.

The money back policy is useful for those who, besides desiring to provide for their own old age and family, feel the need for lump sum benefits at periodical intervals. Under this scheme, the following benefits are payable:

(i) For a policy with a term of 12 years, 1/5th of the sum assured payable on the life assured’s surviving 4 years, a further 1/5th of the sum assured becomes payable on his surviving 5 years and the balance 3/5th of the sum assured on his surviving to the end of the term of 12 years.

(ii) For a policy with a term of 15 years, 1/4th of the sum assured becomes payable on the life assured’s surviving 5 years, a further 1/4th of the sum assured becomes payable on his surviving 10 years and the balance 1/2 of the sum assured becomes payable on his surviving on his surviving to the end of the term of 15 years.

(iii) For a policy with a term of 20 years, 1/5th of the sum assured becomes payable on the life assured’s surviving 5 years, a further 1/5th of the sum assured becomes payable on his surviving 10 years, a further 1/5th of the sum assured becomes payable on his surviving 10 years, a further 1/5th of the sum assured becomes payable on his surviving 15 years and the balance 2/5th of the sum assured becomes payable on his surviving to the end of the term of 20 years.

(iv) For a policy with a term of 25 years, 1/5th of the sum assured becomes payable on the life assured’s surviving 10 years, a further 1/5th of the sum assured becomes payable on his surviving 15 years, a further 1/5th of the sum assured becomes payable on his surviving 20 years and the balance 2/5th of the sum assured becomes payable on his surviving to the end of the term of 25 years.

However in the event of death at any time within the selected term the full sum assured is payable without any deduction or adjustment for the amount that may have been paid earlier by way of survivance benefit.

The bonus additions to the policy will be reckoned of the full sum assured and are payable at the end of the selected term of years or at the life assured’s death, if previous.

In the event of cessation of payment of the premiums under this policy, a paid up assurance, payable at the end of the selected term of years or at a the life assured’s death if previous, is automatically secured provided premiums have been paid under the policy for not less than three years and a minimum paid up assurance of Rs.250 exclusive of any attached bonus is secured.

All bonuses declared and attaching to the policy at the date of cessation of payment of premiums remain attached to the reduced paid up policy is not entitled to participate in the profits declared thereafter.

No loan will be granted under this policy. The minimum amount for which a policy will be issued under this plan is Rs.5,000.

Further, policies will be issued for terms of 12, 15, 20 and 25 years only.

10. Progressive Protection Policy with Profits

This policy is very useful for those who want to provide additional insurance benefits for additional responsibilities.

Only first class lives will be accepted under this plan. For the purpose of Non-medical (Special) Scheme, this policy will be deemed to be for double the sum assured. The sum assured increases automatically by half the initial sum assured at the end of five years and again by half the initial sum assured at the end of ten years, irrespective of the state of health of the policy-holder at that time.

In other works, medical evidence of health will not be required on the occasion of subsequent increase in the sum assured under the policy.

After ten years the benefits under the policy will be double the initial sum assured, payable on survival at the end of the selected term or on death within the term.

For the first five years, premiums will be for the initial sum assured. At the end of five years, and again at the end of ten years, the premiums will increase with the increase in the sum assured.

Bonus will be paid at the end of the selected term or at the death of the life assured, whichever is earlier, and will be calculated on the initial sum assured for the first five years.

After the increase in the sum assured, bonus will be calculated on the increased sum assured from the date of increase.

Loans will be available within the surrender value of the policy. If, after at least three full years premiums have been paid in respect of this policy, any subsequent premium be not duly paid, this policy shall not be wholly void, but the sum assured by it shall be reduced to such a sum as can be allowed according to the rules of the Corporation.

The policy so reduced shall not be entitled to participate in future profits. The existing vested bonus additions, if any , will remain attached to the reduced paid up policy.

The maximum age at entry is 45 years and maximum maturity age is 65 years.

The policy is offered for 20, 25, 30 and 35 years.

The minimum sum assured for which the policy will be issued under this plan is Rs.5,000. and the maximum will be Rs. 1,00,000.

All policies taken under, this plan will be taken into account while arriving at the maximum sum assured.

11. Anticipated Whole Life Policy with Profits

This policy provides two distinct types of benefits in one policy – the benefit of Whole Life Limited Payment Policy and anticipated payments at five yearly intervals.

It provides complete long-range insurance protection or the family and in addition helps meet various short-term needs through periodical payments.

The following benefits are available under this policy.

(i) For a policy with a term of 20 years, 1/8th of the sum assured becomes payable on the life assured’s surviving 5 years, a further 1/8th of the sum assured becomes payable on his surviving 15 years and a final 1/8th of the sum assured becomes payable on his surviving to the end of the term of 20 years.

(ii) For a policy with term of 25 years, 1/10th of the sum assured becomes payable on the life assured’s surviving 5 years, a further 1/10th of the sum assured becomes payable on his surviving 20 years and a final 1/10th of the sum assured becomes payable on his surviving to the end of the term of 25 years.

However, in the event of death at any time, the full assured is payable without any deduction or adjustment for the amount that may have been paid earlier by way of survivance benefit.

Premiums are payable for 20 or 25 years depending upon the premium paying term selected or till death if it occurs within the period.

The bonus will be reckoned on the full sum assured and will be payable at the life assured death.

The policy will not cease to participate in profits after completion of premium paying period but will continue to share in the periodical bonus distribution for full sum assured until the death of the life assured.

No loan is payable under the policy during the premium paying period, but after the policy becomes fully paid up, loan will be available within the surrender value of the policy for such amounts and on such terms and conditions as may be prescribed from time to time.

The minimum amount for which a policy will be issued under this plan is Rs.5,000.

The maximum age at entry is 50 years for a policy with premium paying term for 20 years and 45 years for a policy with premium paying term of 25 years.

12 . New Jana Raksha Policy

This policy has been designed taking into account the problems of non-payment of premiums in time.

A special facility whereby the policy continues to provide full cover for three years on payment of an initial extra single premium has been incorporated under this policy. The benefits under this policy are, the same as those applicable for all Endowment Assurance Policy with Profits.

The policy will be issued to male lives only. Policies will be issued with, maximum age at entry of 40 years. The minimum age at entry will be 18 years completed.

Policies will be issued for terms 12, 15 and 40 year only.

The minimum sum assured for which policy will be under this plan is Rs.5,000 and title maximum sum assured will be Rs.16,000. The sum assured will be issued in the denomination of Rs.5,000, Rs.10,000 and Rs.15,000.

In the event of non-payment of premiums within the days of grace, after the payment of premium for the first two years, the policy will be kept in force for the full sum assured for a period of three years on payment of a single extra premium along with the first premium at a rate of Rs.10.50 per thousand, for ages at entry 29 years and below and at a rate of Rs.15.00 per thousand for ages at, entry 30 years and above.

No commission is payable on this additional premium. If any portion of this extra premium is not utilized for the risk cover, this unutilized portion will be refunded without interest at the time of claim arising by maturity or by death or at the time of surrender.

After at least two years’ premiums have been paid, if default occurs in the payment of premium, full death cover is continued for a period of three years from the first unpaid premium due date.

At any time during the first 36 months from the date of first unpaid premium, the policy-holder can pay the arrears of premium in full with interest or arrears of first two unpaid premiums with interest or arrears of first unpaid premium with interest.

No evidence of health will be required. In case the arrears of premiums are paid in full, the facility of temporary assurance cover for further three years can be availed of at a future date, during the term of the policy.

If the arrears of the premium are paid in part only, the amount will be utilized towards the adjustment of premium starting from the first unpaid premium due date onwards, but no gaps in the adjustment of premium will be allowed.

The policy can be revived by payment of full arrears of premiums with interest, if the period elapsed from the first unpaid premium due date is more than 36 months but not more than 60 months.

For revival after three years’ default in payment of premiums, a Declaration of Good Health is necessary.

After revival, the facility of temporary assurance cover for a further period of three years will be available.

13. Mortgage Redemption Assurance Policy

This policy meets the requirements of institutions and individual borrowers to ensure that the outstanding loan is automatically extinguished in the event of the borrower’s death.

The benefits under the plan at any time during the currency of the policy would be the amount of outstanding loan at the beginning of the year as envisaged at the beginning of the transaction, and would become payable in the event of death of the borrower.

A schedule showing the amounts of outstanding loan at the beginning of each year would be drawn up at the outset on the basis of predetermined rate of interest.

The benefits payable would be fixed as shown in the schedule and only these amounts will be paid under the policy irrespective of the actual loan payments.

The policies would normally be issued only to male lives aged upto 50 years at entry subject to the condition that the insurance cover would in no case extend beyond 65 years.

The policy may be taken either by single premium or annual premiums. Policies on which premiums are payable annually or monthly will not carry any surrender value. The minimum sum assured, under the above plan shall be Rs.10,000 except in the case of large institutional lenders e.g. a Co-operative House Mortgage Society and the minimum sum assured for individual will be Rs.5,000.

14. Children’s Deferred Endowment Assurance

Sometimes a parent or guardian or near relative of a child wishes to take an insurance policy on the lift of the child under which the premium is paid by the proposer during the first few years and by the life assured (i.e. by the child) thereafter.

This can be done by taking the children’s deferred endowment assurance. The low premium rate under this plan is a great attraction. A parent can help to his children to take a policy at a rate which is considerably lower than what they would be called upon to pay at the attaining of majority.

The second advantage of this policy is that the habit of thrift is developed among the child and from the very beginning tries to save some money.

The third advantage is that the cash value if the policy is discontinued before or at majority, can be available for meeting specific expenses of education and marriage.

The policy is taken on the life of child and not on the life of parent.

The parent is merely a proposer and is contracting on behalf of the child.

The policy can be issued on whole life basis, too, but the corporation issues it on endowment basis.

Commencement of Risk

The risk does not commence immediately at the issue of the policy but only on the policy anniversary, following completion of 18 or 21 years.

The policy envisages two stages, one covering the period from the date of commencement of policy to the deferred date, i.e., the date of commencement of risk on the child’s life, called deferment period, and the other covering the period from the deferred date to the date on which the policy emerges as a claim by the death of the child or its survival to a stipulated date.

A combined policy is issued to cover both the aforesaid periods.

Policies under this scheme are issued on the lives of children, both male and female who have completed one year of age but have not completed 18 years.

No medical examination is required where the deferment period is 10 years or more. Policies under this scheme will not be issued for deferment period less than 4 years.

The risk may commence on the life of child since 18 or 21 years of his age, as desired by the proposer.

The provisions of this policy make it obligatory on the life assured to adopt the policy in writing at anytime after attaining majority but before the deferred date.

This provision is necessary to ensure that the life assured will be a major on the deferred date, i.e., will be of age 18 years.

On such adoption by the life assured, the policy will be deemed to be a contract between the corporation and the life assured as the absolute owner of the policy and the proposer or his estate shall not thereafter have any right or interest in the policy.

The person entitled to the policy money will have the option of taking a cash payment in entire cancellation of the policy contract before the deferred date.

In the event of the life assured, death (the child’s death) before the deferred date, i.e., the date of commencement of risk, the policy shall stand cancelled and all premiums paid.

15. Children’s Anticipated Policy with Profits

This policy can be taken by parent or legal guardian or any near relative on the life of a child on whose life risk will commence at the age of 18 completed, or 21 years as required by the proponent.

The policy will automatically vest in the child at the end of the deferment period and half of the premiums paid during this period will be paid to him in lump sum.

Risk will commence at the Deferred Date and full sum assured will be payable on survival of the life assured to the date of maturity or on his death, if earlier.

The policy will attach bonus from the Deferred Date at the Endowment Assurance Rate.

This policy is issued on the lives of children both males and females upto the age of 14 years. Like Children’s Endowment Policy, medical examination is not required where the deferment period is 10 years or more.

Where it is less than 10 years, medical examination of the child is required. Policies are issued for maturity ages 33, 40, 45, 50, 55 and 60 years.

Policies under this plan will not be issued for deferment periods less than four years. The proposals on the lives of minor girls will be entertained only when the father and other insurable members of the family are of adequately insured and the social, cultural, and educational background of the family is good.

An extra-premium on account of sex will be payable from the Deferred Date.

If the premiums due prior to the Deferred Date have been paid, an amount equal to 90 per cent of the total amount of premiums paid excluding the premiums for the first years is payable as a cash option.

The policy will be cancelled in case the life assured dies before the Deferred Date. A sum of money equal to the premiums paid will become payable to the person entitled to the policy moneys in such event provided the policy is in full force.

The payment of premiums does not cease on death of the proposer during the deferment period.

No loan will be granted on this policy during the deferment period. Disability benefit unless specifically excluded will be available on this policy with effect from such date.

16. Jeevan Saathi

‘Jeevan Saathi’ is the new Joint Life Plan with a difference. The plan is designed to gift a total protection to families; particularly for the working couple.

Row ‘Jeevan Saathi’ is different from the existing Joint Life Plan!

Under the existing Joint Life Plan two persons’ lives can be jointly covered and the Sum Assured becomes payable either on the first death or on the expiry of the selected term.

Under the Jeevan Saathi Plan, only the lives of husband and wife are jointly covered. The basic S.A. together with vested bonuses are payable in event of survival to maturity of either or both of the partners.

In the event of the first death of anyone of the lives assured, the survivor gets the basic Sum Assured. Again basic Sum Assured with bonuses is payable to the nominee, in the event of the premature death of the second partner.

Another important feature of this plan is that the premium under this policy ceases on the first death and the surviving partner need not have to pay any more premiums. But inspite of non-payment of premium after the first death, the policy will continue to participate the bonuses will accrue till the final settlement.

From the benefits available it could be seen that a family that is used to certain economic comforts, gets a lump sum immediately, if one of the partners dies, to maintain a certain level of economic stability.

Once again the basic Sum Assured is paid to the surviving partner on, maturity or in the event of the other early death, to the nominee.

Thus this plan gives a total complete insurance protection to the whole family.

What are the eligibility condition for purchasing life insurance, under this plan?

Policies under this plan will be issued on the lives of husband and wife, provided the latter belongs to the Category-1.

The plan is available for specified Terms of 15, 20 and 25 years only. The age of the older life at maturity should not be more than 65 years.

The minimum basic Sum Assured under this plan, is Rs.5,000 and the maximum is Rs.1,00,000 under one or more Policies.

The premium should be minimum Rs.3 per thousand. S.A. over the premium under Endowment Assurance on older life for the same term. The minimum difference between the Double Joint Life Endowment Assurance premium and Endowment Assurance premium , as calculated in the aforesaid manner, is Rs.3 per thousand S.A. only against Rs.5 per thousand. S.A. applicable to existing Joint Life Endowment Assurance plan.

17. Married Women’s Property Act Policy

A married man can effect a policy on his own life, wife and/or children and shall be deemed to be a trust for their benefits and shall not, so long as any object of the trust remains, be subject to the control of the husband or his creditors, or form part of his estate.

The policy effected under Sec.6 of the Married Women’s Property Act 1874 for the above purpose, shall not be aggregated with his other property provided the trust is absolute.

The term ‘children’ means sons and daughters only and excludes an adopted son by Hindus. Grih Lakshmi Policy issued in December, 1975, is an important instance of Married Women’s Property Act Policy.

18. Survivorship, Reversionary or Centingent Assurance

There are two persons in this policy, first a named insured and another named person.

The sum assured is payable if the life assured dies before another specified person (named person) or counter life. If the counter life dies first, nothing is payable and the contract ceases.

These assurances usually arise in connection with reversionary transactions.

Suppose in terms of a trust or will A will be entitled to certain property at the death of B provided A is then living. Here A possesses a contingent interest in that property and his interest has a market value. But the purchaser of the interest will receive nothing if a precedes B and, therefore, he effects a contingent assurance for the amount of capital.

The purchaser is thus fully protected because

(a) the purchaser is thus fully protected, as he received the capital from trust or will if A is living at B’s death,
(b) he receives the policy money if A dies before B.

The rate of premiums depends upon the age of the insured, of named person.

When the life assured is young and the counter life is old the risk and premium, therefore, would be possible equal to that of a short period temporary insurance.

If the ages are equal to or the counter life is younger the premium is roughly that of a whole life assurance.

This policy is not widely written.