S.

S JAIN SUBODH LAW COLLEGE, MANSAROVAR,

JAIPUR

SESSION: 2019-2020

SUBJECT: INSURANCE LAW

TOPIC: KINDS OF LIFE INSURANCE

SUBMITTED TO: SUBMITTED BY:

MS. AASHI SAXENA GARGI SHARMA

ASSISTANT PROFESSOR (B.A.L.L.B. SEMESTER VI A)

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 SUPERVISOR’S CERTIFICATE

This is to certify that the content of this project entitled, “Kinds of life insurance” by GARGI
SHARMA is bonafide work of her submitted to S.S. JAIN SUBODH LAW COLLEGE for
consideration in partial fulfilment of the requirement of Degree of B.A.L.L.B.

The original research was carried under the supervision of Ms. Aashi Saxena (Assistant
Professor) during the academic year 2019-20. On the basis of the declaration made by her, I
recommend this project report for the evaluation.

Date: Signature:

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 Declaration by Scholar

This is to declare that I have carried this project work “Kinds of life insurance” myself for
the Insurance Law project as per guidelines mentioned under the supervision of Assistant
Professor, Ms. Aashi Saxena I have not submitted this work elsewhere for any other
purpose.

Name: GARGI SHARMA Date:

Class: Semester VI (A)

Signature:

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 ACKNOWLEDGMENT

I have taken efforts in this project. However, it would not have been possible without the kind
support and help of many individuals. I would like to extend my sincere thanks to all of them.

I thank my god for providing me with everything that I required in completing this project. I
am highly indebted to the teacher incharge Ms. Aashi Saxena (Assistant Professor) for her
guidance and constant supervision as well as for providing necessary information regarding
this project and also for her support in completing this project.

I would like to express my gratitude towards my parents and many friends for their kind co-
operation and encouragement which helped me in the completion of this project.

My thanks and appreciations also go to the peoples who have willingly helped me out with
their abilities.

Date: Name: GARGI SHARMA

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INDEX

1. INTRODUCTION..................................................................06
2. TERM LIFE INSURANCE...................................................07
3. WHOLE LIFE INSURANCE................................................07
4. UNIVERSAL LIFE INSURANCE.......................................08
5. INDEXED UNIVERSAL LIFE INSURANCE....................08
6. FINAL EXPENSE INSURANCE..........................................10
7. CONCLUSION.......................................................................11
8. BIBLIOGRAPHY...................................................................12

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INTRODUCTION
There are so many different options for buying life insurance but it’s actually not as
complicated as it may seem. When it comes down to it, there are essentially two kinds of
policies: term life insurance and whole life insurance. Term life insurance lasts for a specific
amount of time (the term) and expires at the end of the term. Whole life insurance, on the
other hand, is a form of permanent life insurance and lasts your entire life. There are more
insurance plans that fall into these two categories, each with their own benefits and
drawbacks.

Types of life insurance

You may be familiar with term and whole life insurance, but there are several other options
depending on your needs and financial situation. We’ll explain everything you need to know
about the following eight types of life insurance:1

 Term life insurance

 Whole life insurance
 Universal life insurance
 Indexed universal life insurance
 Variable life insurance
 Variable universal life insurance
 Final expense insurance
 Group life insurance

1
Baldwin, B.G. (00). The new life insurance invest-ment advisor, second edition. New York: McGraw Hill.

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 Term life insurance
Term life insurance lasts for a number of years before it expires. If you die before the term is
up, a set amount of money, known as the death benefit, is paid to your designated beneficiary 

. Term insurance is considered the simplest, most accessible life insurance policy.

When you make your payments (known as your premiums), you’re paying for the death
benefit that will go to your beneficiaries when you are gone. The death benefit can be paid
out as a lump sum, a monthly payment, or an annuity. Most people elect to receive their death
benefit as a lump sum.2

Term life insurance policies are more affordable than other types of life insurance policies
and generally have lower premium costs. The average monthly premium payment for a 20-
year, $500,000 policy for a healthy 35-year-old female is $24.48.

Methodology: Rate is calculated for a female non-smoker with a Preferred health rating based
in Ohio; Life insurance averages are based on a composite of policies offered by Policygenius
from AIG, Banner, Brighthouse, Lincoln, Mutual of Omaha, Pacific Life, Principal,
Protective, Prudential, SBLI, and Transamerica and may vary by insurer, term, coverage
amount, health class, and state. Not all policies are available in all states. Rate illustration
valid as of 1/11/2021.

Whole life insurance

Whole life insurance, on the other hand, is a type of permanent life insurance because it does
not expire. It has a death benefit and a cash value, which is an investment-like, tax-deferred
savings account that is included in the policy. The cash value accrues interest at a
predetermined fixed rate. Each month, a certain portion of your premium will go into the cash
value of the policy, which offers a guaranteed rate of return (the exact amount that goes into
savings is determined by your individual policy). The policy's cash value grows over time
and can be withdrawn when it accumulates enough value or is used for a loan.

A whole life insurance policy can cost five to 15 times as much as a term life policy for the
same death benefit amount, according to Policygenius data in January 2021.
2
Cathy pareto, Inroduction to insurance, 10june2014, http://i.investopedia.com/inv/pdf/tutorials/insurance.pdf

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Whole life offers lifetime coverage as long as you pay the premiums. However, the cash
value component makes whole life more complex than term life because of surrender fees,
taxes, interest, and other stipulations.

Whole life insurance may be worthwhile if you need the cash value to cover things like
endowments or estate plans, or if you have long-term dependents such as children with
disabilities. 3

Universal life insurance

Universal life insurance has a cash value, just like a whole life insurance policy. Your
premiums go toward both the cash value and the death benefit. But there’s a twist: You can
change the premium and death benefit amounts without getting a new policy.

Although you need to have a minimum premium to keep the policy in force 

, you can use the cash value to pay that premium. That means if you have enough money in
the cash value, you can use that to skip premium payments entirely, letting the accrued
interest do the work until the cash value is depleted.

The cash value of a universal life policy

But the cash value of a universal life insurance policy has an interest rate that’s sensitive to
current market interest rates. If the interest rate being credited to your policy decreases to the
minimum rate, your premium would have to increase to offset the reduced cash value.

This flexibility makes universal life insurance attractive to some people, but it’s also
confusing and generally not a good life insurance purchase.

Indexed universal life insurance

Indexed universal life insurance (IUL) is a type of universal life insurance (UL), but the way
the cash value behaves differentiates the two.

An index is essentially a group of investments like stocks or bonds. The S&P 500 and the
NASDAQ-100 are examples of indexes. The insurer doesn’t directly invest in the market but
uses the interest rate and performance of a specific index to set the interest rate for your
policy.

3
Rajat Sharma, 7 types of insurance, 12may2014, https://www.iedunote.com/types-of-insurance

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Indexed universal life insurance policies have a minimum guaranteed interest rate (so you
won’t lose money), but the interest rates aren’t fixed or varied like some other permanent
insurance policies.

IUL policies have all the same offerings as universal life insurance policies, but the way the
cash value account grows and shrinks is different. While universal life’s cash value has a
variable interest rate set by the life insurance company, indexed universal life’s cash value is
based on an index chosen by the insurer.

Variable life insurance

The money paid into a variable life insurance cash value goes into a series of mutual fund-
like sub-accounts where you can get some decent growth, but you can also lose money
depending on the market.

It can be used as an investment option

This type of policy’s cash value is more akin to investing. While this makes variable life
insurance policies a better investment option than whole life insurance policies — with
potential for higher, tax-deferred growth — you can only invest in the sub-accounts available
through your policy. That means you don’t get to choose from the wide variety of mutual
funds that are available on the open market.

It is a riskier option

The product is also riskier. Why? The same reason investing in stocks is risky: Most people
don’t know much about the stock market and don’t know enough to make changes in their
investment. There are too many variables for the average person to manage it effectively.

Variable universal life insurance

If it seems like variable universal life insurance is a combination of universal and variable life
insurance policies, that’s because they share many of the same elements.

A variable universal life insurance policy enables you to adjust the premium and death
benefit amount while investing in the policy’s cash value. But it also presents many of the
same risks associated with the other types of insurance. Most people don’t need a policy with

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the complexities of a universal life insurance policy, so it’s recommended to explore more
appropriate investment and insurance options.4

You would be better off combining a cheaper term life insurance policy with a dedicated
investment option, like a mutual fund. This offers the same insurance coverage as a variable
universal life insurance policy with lower fees and easier administration.

Final expense insurance

If term life insurance, whole life insurance, or other permanent policies aren’t a fit, but you’re
still looking for a way to cover funeral or burial costs, ) final expense life insurance might be
right for you.

Final expense insurance is a unique type of policy that covers the cost of anything associated
with your death, including medical care, a funeral, or cremation.

Final expense insurance is usually attractive to older people who don’t have other life
insurance coverage (maybe their term life policy expired) and don’t have enough savings to
pay for their funeral, which costs $8,000-10,000 on average. Coverage is usually for small
amounts, typically up to $50,000 based on policies offered by Policygenius in 2021, to cover
those expenses. It’s useful if you don’t have another way to pay for your funeral and don’t
want to burden your family with the costs. It’s also a good option for adult children looking
to purchase life insurance for their aging parents to cover such expenses.

However, final expense insurance policies have a higher premium for a relatively low
coverage amount. If you or your family can pay for a funeral through other means, that’s your
best bet. 5

4
Virginia Cooperative Extension, Life insurance,the different types of
policies,11april2019,https://www.pubs.ext.vt.edu/content/dam/pubs_ext_vt_edu/354/354-143/354-143_pdf.pdf
5
Amanda sahih and Shoenethal Rebbecca, types of life insurance,12jan2021,https://www.policygenius.com/life-
insurance/types-of-life-insurance/

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CONCLUSION

Term life insurance policies are usually the best solution for most people who need life
insurance. They’re generally the most affordable, simple to understand, and they provide the
straightforward protection that most people shopping for a policy would want.

That doesn’t mean that other life insurance policy types are wrong for everyone. Some people
tout the benefits of a permanent life insurance policy as a "forced savings vehicle”. Many
people struggle to adequately save for retirement, and a permanent policy provides separate
cash accumulation for something they’d be paying for anyway (their life insurance policy).

Simplified issue and guaranteed issue life insurance are options for people who might not be
able to otherwise get insured because of age or poor health. Final expense insurance is
available for elderly consumers who don’t want to burden their families with burial costs.

You should always speak to a licensed independent broker or a financial advisor to determine
the best insurance company and policy for you. They can help you weigh out the pros and
cons of each type of coverage and help you buy the right type of insurance for your needs. 6

6
Amanda sahih and Shoenethal Rebbecca, types of life insurance,12jan2021,https://www.policygenius.com/life-
insurance/types-of-life-insurance/

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BIBLIOGRAPHY

SINGH B.N., NEW INSURANCE LAW; UNIVERSAL LAW PUBLISHING-

AN IMPRINT OF LEXIS NEXIS, 5TH EDITION, 2016

IVAMY HARDY E.R., CASEBOOK ON INSURANCE LAW;

BUTTERWORTHS LAW, 4TH REVISED EDITION, 1984

OTHER REFERENCES

www.lkouniv.ac.in › site › writereaddata › siteContent

https://www.google.com/ur

https://www.google.com/url

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