Types of life insurance

Types of life insurance
Life insurance may be divided into two basic classes – temporary and permanent or following subclasses - term, universal, whole life and endowment life insurance.

[edit] Temporary Term Insurance
Term assurance: provides for life insurance coverage for a specified term of years for a specified premium. The policy does not accumulate cash value. Term is generally considered "pure" insurance, where the premium buys protection in the event of death and nothing else.

There are three key factors to be considered in term insurance:

1.Face amount (protection or death benefit),
2.Premium to be paid (cost to the insured), and
3.Length of coverage (term).
Various insurance companies sell term insurance with many different combinations of these three parameters. The face amount can remain constant or decline. The term can be for one or more years. The premium can remain level or increase. A common type of term is called annual renewable term. It is a one year policy but the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time. Another common type of term insurance is mortgage insurance, which is usually a level premium, declining face value policy. The face amount is intended to equal the amount of the mortgage on the policy owner’s residence so the mortgage will be paid if the insured dies.

A policy holder insures his life for a specified term. If he dies before that specified term is up, his estate or named beneficiary receives a payout. If he does not die before the term is up, he receives nothing. In the past these policies would almost always exclude suicide. However, after a number of court judgments against the industry, payouts do occur on death by suicide (presumably except for in the unlikely case that it can be shown that the suicide was just to benefit from the policy). Generally, if an insured person commits suicide within the first two policy years, the insurer will return the premiums paid. However, a death benefit will usually be paid if the suicide occurs after the two year period.

[edit] Permanent Life Insurance
Permanent life insurance is life insurance that remains in force (in-line) until the policy matures (pays out), unless the owner fails to pay the premium when due (the policy expires OR policies lapse). The policy cannot be canceled by the insurer for any reason except fraud in the application, and that cancellation must occur within a period of time defined by law (usually two years). Permanent insurance builds a cash value that reduces the amount at risk to the insurance company and thus the insurance expense over time. This means that a policy with a million dollar face value can be relatively expensive to a 70 year old. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value.

The four basic types of permanent insurance are whole life, universal life, limited pay and endowment.

[edit] Whole life coverage
Whole life insurance provides for a level premium, and a cash value table included in the policy guaranteed by the company. The primary advantages of whole life are guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges will not reduce the cash value shown in the policy. The primary disadvantages of whole life are premium inflexibility, and the internal rate of return in the policy may not be competitive with other savings alternatives. Also, the cash values are generally kept by the insurance company at the time of death, the death benefit only to the beneficiaries. Riders are available that can allow one to increase the death benefit by paying additional premium. The death benefit can also be increased through the use of policy dividends. Dividends cannot be guaranteed and may be higher or lower than historical rates over time. Premiums are much higher than term insurance in the short-term, but cumulative premiums are roughly equal if policies are kept in force until average life expectancy.

Cash value can be accessed at any time through policy "loans". Since these loans decrease the death benefit if not paid back, payback is optional. Cash values are not paid to the beneficiary upon the death of the insured; the beneficiary receives the death benefit only. If the dividend option: Paid up additions is elected, dividend cash values will purchase additional death benefit which will increase the death benefit of the policy to the named beneficiary.

[edit] Universal life coverage
Universal life insurance (UL) is a relatively new insurance product intended to provide permanent insurance coverage with greater flexibility in premium payment and the potential for a higher internal rate of return. There are several types of universal life insurance policies which include "interest sensitive" (also known as "traditional fixed universal life insurance"), variable universal life insurance, and equity indexed universal life insurance.

A universal life insurance policy includes a cash account. Premiums increase the cash account. Interest is paid within the policy (credited) on the account at a rate specified by the company. Mortality charges and administrative costs are then charged against (reduce) the cash account. The surrender value of the policy is the amount remaining in the cash account less applicable surrender charges, if any.

With all life insurance, there are basically two functions that make it work. There's a mortality function and a cash function. The mortality function would be the classical notion of pooling risk where the premiums paid by everybody else would cover the death benefit for the one or two who will die for a given period of time. The cash function inherent in all life insurance says that if a person is to reach age 95 to 100 (the age varies depending on state and company), then the policy matures and endows the face value of the policy.

Actuarially, it is reasoned that out of a group of 1000 people, if even 10 of them live to age 95, then the mortality function alone will not be able to cover the cash function. So in order to cover the cash function, a minimum rate of investment return on the premiums will be required in the event that a policy matures.

Universal life insurance addresses the perceived disadvantages of whole life. Premiums are flexible. Depending on how interest is credited, the internal rate of return can be higher because it moves with prevailing interest rates (interest-sensitive) or the financial markets (Equity Indexed Universal Life and Variable Universal Life). Mortality costs and administrative charges are known. And cash value may be considered more easily attainable because the owner can discontinue premiums if the cash value allows it. And universal life has a more flexible death benefit because the owner can select one of two death benefit options, Option A and Option B.

Option A pays the face amount at death as it's designed to have the cash value equal the death benefit at maturity (usually at age 95 or 100). With each premium payment, the policy owner is reducing the cost of insurance until the cash value reaches the face amount upon maturity.

Option B pays the face amount plus the cash value, as it's designed to increase the net death benefit as cash values accumulate. Option B offers the benefit of an increasing death benefit every year that the policy stays in force. The drawback to option B is that because the cash value is accumulated "on top of" the death benefit, the cost of insurance never decreases as premium payments are made. Thus, as the insured gets older, the policy owner is faced with an ever increasing cost of insurance (it costs more money to provide the same initial face amount of insurance as the insured gets older).

[edit] Limited-pay
Another type of permanent insurance is Limited-pay life insurance, in which all the premiums are paid over a specified period after which no additional premiums are due to keep the policy in force. Common limited pay periods include 10-year, 20-year, and paid-up at age 65.

[edit] Endowments
Main article: Endowment policy
Endowments are policies in which the cash value built up inside the policy, equals the death benefit (face amount) at a certain age. The age this commences is known as the endowment age. Endowments are considerably more expensive (in terms of annual premiums) than either whole life or universal life because the premium paying period is shortened and the endowment date is earlier.

In the United States, the Technical Corrections Act of 1988 tightened the rules on tax shelters (creating modified endowments). These follow tax rules as annuities and IRAs do.

Endowment Insurance is paid out whether the insured lives or dies, after a specific period (e.g. 15 years) or a specific age (e.g. 65).

Insurance Definitions Beneficiary

Insurance Definitions
Beneficiary
The person(s) named in the policy to receive the life insurance proceeds upon the death of the insured.


Cash (Surrender) Value
The amount that is available in cash for loans and that may be available for withdrawals. Accessing Cash Surrender Value may reduce the death benefit and may increase the risk of lapse.

Convertible Term Insurance
Term insurance which can be exchanged (converted), at the option of the policyowner and without evidence of insurability, for a permanent insurance policy.

Dividend
A return of part of the premium on participating insurance that is based on the insurer's investment, mortality, and expense experience. Dividends are not guaranteed.
Face Amount
The amount stated on the face of the policy that will be paid in case of death. It does not include additional amounts payable under accidental death or other special provisions, or acquired through the application of policy dividends.

Insurability
Acceptability to the company of an applicant for insurance.

Insured or Insured Life
The person on whose life the policy is issued.

Level Premium (Term Insurance)
Life insurance for which the premium remains the same from year to year. The premium is normally more than the actual cost of protection during the earlier years of the policy and less than the actual cost in the later years. The building of a reserve is a natural result of level premiums. The payments in the early years, together with the interest that is to be earned, serves to balance out the underpayment of the later years.

Loan (Policy Loan)
A loan made by a life insurance company from its general funds to a policyowner on the security of the cash value of a policy.

Paid-up Insurance
Insurance that will remain in force with no need to pay additional premiums.

Participating Policy
A life insurance policy that is eligible for the payment of dividends by the insurer (see also Dividend.)

Permanent (Term Insurance)
Any form of life insurance except term; generally insurance that builds up a cash value, such as whole life.

Policyowner
The person who owns a life insurance policy. This is usually the insured person, but it may also be a relative of the insured, a partnership or a corporation.

Premiums
Payments to the insurance company to buy a policy and to keep it in force.

Renewable Term Insurance
Term insurance which can be renewed at the end of the term, at the option of the policyowner and without evidence of insurability, for a limited number of successive terms. The rates generally increase at each renewal as the age of the insured increases.

Term Insurance
Life insurance that does not build up cash value and where the premium normally increases as the insured gets older.

Universal Term Insurance
A flexible premium life insurance policy under which the policyowner may change the death benefit from time to time (with satisfactory evidence of insurability for increases) and vary the amount or timing of premium payments. Premiums (less expense charges) are credited to a policy account from which mortality charges are deducted and to which interest is credited at rates which may change from time to time.

Whole Term Insurance
A basic type of permanent life insurance which can provide lifetime protection at a level premium. Premiums must generally be paid for as long as the policy is in force.

NEW JUBILEE GROUP LIFE INSURANCE

Group Insurance is universally acknowledged as the best way to safeguard employee’s interests. During the times of sheer misfortune such as Death, Disability and Sickness, Group Insurance yields a specified sum to the Insured & his family just when it’s needed the most.

A group Insurance scheme demonstrates a company’s concern for its employees’ welfare and provides them sense of security and peace of mind.

ADVANTAGES OF GROUP INSURANCE

Some of the eminent Advantages of Group Insurance are outlined below:

Fulfilling Legal Requirements

According to Clause 10-B of W.P(Standing orders) it is a mandatory obligation on the part of an employer to provide Group Life Insurance to his employees.

Obtaining Tax advantages

The premium that the company pays for Insurance are deducted from its taxable income. Furthermore, the benefits paid on death and disabilities are exempt from income and estate taxes. Hence, the employees and/or his family obtain tax free claim amounts.

Attracting Ingenious Employees

Group Insurance is a standard benefit in most, if not all companies. It provides Competitive advantage to the employer and helps in attracting and retaining capable staff.

Keeping Costs Low

Critical Illness Covers: Myocardial Infraction, Coronary Artery Surgery, Stroke, Cancer, Renal Failure.

Accidental Medical Expense: If an employee incurs Medical expenses due to accidental injuries, this coverage provides payment of actual medical expenses subject to maximum of 10% of life sum assured.

Blessings for Life

How do you imagine spending your retirement? Relaxing with your family? Vacationing Overseas? Or burdened with financial problems? It’s time to let go of all the anxiety and look forward to a comfortable post retirement life, and to make timely decisions for timeless support!

RBS has tied up with NJI life to bring to you Blessings for Life – a post retirement income plan with a built in advantage of life insurance. We provide you an array of products and services and tailor them to your individual needs to help you reach your financial goals for your retirement years, so that you and your family are always well provided for.

How Does This Plan Work?
Contributions from the policy holder are invested in NJI Life Managed Fund or Meesaq (Interest Free) Fund (whichever they choose) and returns earned, accumulate as policyholder’s cash value.

What Are The Benefits Of This Plan?
Blessings for Life is especially designed to provide you and your family with maximum financial stability at the time of your retirement or in case of your untimely death, during the term of the plan.

Maturity Benefit
At the end of the term of the plan, policyholder will receive the cash value accumulated during the term of the plan.

Policyholder will also have an option to use the accumulated cash value, to buy a pension, especially tailored for individuals who prefer a steady stream of income instead of a lump sum amount, at the time of retirement. This option is only available to policyholders who at maturity are at least 55 years of age.

Death Benefit
If the life assured expires during the term of the of the plan, following benefits will be paid to the nominee(s)

* PKR 200,000 PLUS
* Accumulated Cash Value or Regular Premiums paid, whichever is higher.

Are There Any Optional Benefits Available With This Plan?
Additional benefits* can also be availed on optional basis under Blessings for Life.

* Family Income Benefit – caters to the financial needs of one’s family in case of an untimely death of the life assured during the term of the plan. It provides a steady stream of monthly payments, in addition to the death benefit, to the family until the end of the policy term.
* Accidental Death Benefit – provides an additional cover of PKR 200,000 in case of an accidental death of the life assured during the term of the plan.
* Premium Waiver – ensures continuity of premium payments by NJI Life into Blessings for Life plan on behalf of the policyholder in case policyholder is unable to pay premiums due to illness or disability.

How Is This Plan Different From Any Other Retirement Plan Available In The Market?
Blessings for Life offers a guarantee of 100% return of regular premium in case of death of the life assured in addition to the payment of PKR. 200,000.

How Is The Money Invested In This Plan?
Any contributions made as a participant of this plan will be invested in one of the two funds mentioned below according to the choice of fund YOU want to invest in.
NJI Life offers two different types of funds that YOU can choose from;

* NJI Life Managed Fund
* NJI Life Meesaq Fund– an Interest Free Fund

These funds are managed by expert investment managers and are backed by premium securities to ensure optimized returns with manageable risk exposure. Investments in these funds are regulated by the Securities and Exchange Commission of Pakistan under Insurance Ordinance 2000.

How Are The Funds Allocated in This Plan?
The funds are allocated as per the schedule shown below:

How Much Do I Have To Pay To Avail This Plan?
Only PKR 36,000 annually (PKR 3,000 monthly), will help you ensure that your tomorrow is secure.

What Is The Premium Payment Frequency For This Plan?
Blessings for Life offers you the option to pay premiums for this plan annually, semi-annually, quarterly or monthly.

Can I Withdraw My Funds From This Plan, When I Need Them?
Funds can be withdrawn from the accumulated cash value if and when required (after completion of two policy years). A minimum amount PKR 36,000 is to be left with the plan in order for the plan to stay active.

Death benefit will be reduced by partial withdrawals made under the plan.

What if I want to make contributions in addition to regular premiums?
You may have extra funds available with you at any stage. You can top up your regular investments under this plan by making ad-hoc premium payments. Ad-hoc premium will be allocated at 100%.


*Maximum age at maturity should not exceed 75 years

What steps should I take to enroll for this Plan?
Blessings for Life can be availed by following two simple steps:

1. Select the term of the plan, amount you wish to contribute and the frequency you wish to contribute with the plan, OR
2. Contact your personal banker for further details.

What Are The Charges Applicable To This Plan?
Following charges* will be applicable on your plan:

* A bid/offer spread of 5%,
* Trimmed premium allocation in first two policy years,
* An investment management charge of 1.5% per annum of the fund value that will be deducted on weekly basis.
* Administration fee. Currently PKR 28 per month.
* Benefit assured charges to provide death benefits under this plan.

*All charges are reviewable by the company

Things to Remember:

* Blessings for Life is a Unit Linked Joint Life Plan which is subject to investment risk.
* NJI Life or RBS Pakistan Ltd does not guarantee the value of Units.
* The value of units may rise, fall or remain unchanged. No guarantees in respect of any Funds are given by NJI Life or RBS Pakistan Ltd.
* The past performance of funds is not necessarily indicative of the future performance of any of these funds.
* All benefits payable under the policy are subject to applicable laws (financial or otherwise), as they exist in Pakistan from time to time.
* Unit prices of NJI Life Managed Fund are published in all leading dailies on a weekly basis. (every Thursday)
* Please refer to the policy document of this plan and ad-on benefits for details.
* For further information regarding products offered by NJI Life, you may visit our website:

Disclaimer:
The applicant/buyer of this product fully agrees and understands that the Bank shall under no circumstances whatsoever, be responsible nor shall the Bank be held liable to the applicant/buyer or any other third party in respect of any representation and/or undertaking made by NJI Life in relation to this life insurance product and/or any benefit arising out of it. Should the applicant/buyer proceed to subscribing to this life insurance product, he/she shall do so on a voluntary basis at his/her sole risk and the Bank shall have no responsibility or liability whatsoever in respect of any disputes and/or claims arising as a consequence of the investment performance of the Fund comprising of contributions from the applicant/buyer and/or for any other reason whatsoever. The cash value/account value and benefits shown assume that premiums are paid in full when due and no withdrawals have been made from the policyholder’s cash value/account value.

All guarantees mentioned in this brochure are backed by NJI Life and the Bank is not liable for the performance of NJI Life on this part.