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.
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In this kind of policy the insured is given a reversionary bonus as a percentage of his sum assured which can be withdrawn by him on maturity of the policy only.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
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 part of the premium paid towards Allocation Charge,Policy Administration Charges, Fund 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 of 5 yrs. 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.