Classifications of Life Insurance Policies

• According to Nature (Policies are differentiated based on the nature of benefits offered)

  Temporary Policies These policies offer only protection or death benefit over a limited period of time.

  Permanent Policies These policies offer death and living benefits within the insured’s lifetime. Living benefits may be in the form of dividends, anticipated endowments, universal life policies, and cash values.
• According to Coverage (Policies are differentiated based on the number of persons enjoying protection under a specific policy)

  • Individual Policies A policy which provides insurance protection to one person only
  • Joint Life A policy which covers the lives of two or more persons. Under this policy the first death which occurs among the lives covered effectively terminates the policy
  • Group Life insurance policy which covers the life of a group of people.
• According to Participation in Divisible Surplus (Policies are differentiated based on whether or not such are entitled to receive dividends)

  • Participating A policy which entitles policyowners to receive dividends. Dividends are sourced from the surplus earnings of the insurance company which the board of directors could decide to share with policy owners with participating policies.
  • Non-participating Does not share in the dividends
• According to Line of Business (Policies are differentiated based on the market segments to which a policy caters)

  • Ordinary A policy which caters to the middle and upper income-earners. Premiums of this policy are payable on an annual, semi-annual, or quarterly basis.
  • Industrial A policy which caters to low income-earners. Premiums of this policy are payable on a monthly, weekly, or daily basis.
  • Group A policy which caters to the insurance needs of employee groups, unions, and the like, the premiums of which are generally deducted from the salaries of employees