Life Insurance Policy Types and Features
Domain 3 tests whether you can match a customer's need and budget to the right product and explain its features without exaggeration.
Product families
- Term insurance: pure protection for a fixed period; no maturity value; lowest premium for a given sum assured.
- Whole life: cover until death, often with limited premium payment.
- Endowment: pays the sum assured plus bonuses at maturity or on earlier death; higher premium.
- Money-back: survival benefits at intervals plus a reduced maturity value.
- ULIP: part of the premium buys units in a fund; investment risk is borne by the policyholder.
- Micro insurance products: simple, low-premium covers designed for low-income households.
Features to explain
Sum assured, policy term, premium mode, bonus, surrender value, paid-up value, policy loan, revival and nomination.
Worked example
A 30-year-old with two dependants can pay ₹15,000 a year. An endowment for ₹10 lakh may cost more than that, while a term plan can provide ₹1 crore for a similar outlay. The correct advice is to buy adequate term cover first and consider savings products only after protection needs are met.
Traps
Calling ULIP returns guaranteed; saying a term plan builds surrender value; confusing paid-up value with surrender value; selling a savings product when the need is protection.