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TRADITIONAL POLICIES These are policies introduced by the LIC in the form of its various
plans like Jeevan Anand, Komal Jeevan etc. When the Life insurance
sector was opened for its privatization companies like ICICI prudential,
Max New York Life etc. came into the market with their new policies
built on the traditional platform being followed by LIC.
TRADITIONAL PLATFORM In this platform the policyholder chooses his
sum assured and duration of policy and on the basis of his age the
premium is determined. The policy holder pays this premium for the fixed period as per the
policy and is able to withdraw the proceeds / returns after the expiry of
the stipulated period under the policy. In this kind of policy the insured is given a reversionary bonus as a
percentage of his sum assured which can be withdrawn by him on maturity
of the policy only. Till sum time ago this was the largest selling kind
of policy but is now steadily being replaced by Unit Linked Insurance
Policies.
UNIT LINKED POLICIES These policies were introduced in India by Birla Sun Life Insurance Co.
Ltd. and these policies form a major share of the portfolio of all the
other insurance companies as of date. In these policies the insured chooses the premium
he wants to pay, the duration for which he pays the same and the period
for which he wants the insurance coverage. Consequently the insurance
company determines the sum assured. In these policies the Insurance
companies take a certain percentage of
the premium paid towards management charges and mortality charges. The
balance premium is invested according to the insured’s risk profile and
units are allocated according to the unit value of the desired fund.
Every year additional units are allocated to the insured taking into
account the additional premium received and the interest income earned.
The policy holder’s investment / return depends upon the market value of
these units. After a determined lock in period the insured can withdraw any amount
from his corpus any time he chooses to. These flexibilities and user friendliness are the reasons behind the
unit linked policies constituting 75% of the fresh policies sold in the
industry as of date.
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