Quora Answer: Can You Explain Different Life Insurance Schemes Simply?

The following is my answer to a Quora question: “Can you explain different life insurance schemes in a simple way?”

There are two categories of insurance: personal life insurance, and general insurance.  Personal life insurance has three main categories: hospitalisation plans, accident plans, and life plans.

Hospitalisation, and accident plans are multiple claim plans, since you can fall ill, or get into an accident more than once in your life.  Hospitalisation plans provide coverage for hospitalisation, including pre- and post-hospitalisation check-ups for a specific period.  This is most likely 90 to 100 days.  In Singapore, the insurer deals directly with the hospital, with little or no payment by the policyholder to be claimed back.  Coverage also includes treatment for mental conditions, organ transplant, and treatments for critical illnesses, provided none of them are pre-existing conditions.  Accident plans include coverage for accidental death.  There is also the option of payout for dismemberment, disability, and loss of limbs.

Life insurance itself has different types.  Primarily, there are whole life plans, and term plans.  Whole life plans have higher premiums, but they cover you for your “whole” life, which is normally taken to be age 100 years.  There are plans which differ, and may mature up to age 100 years.  Investment-linked plans, and universal life plans, are types of whole life insurance, with a investment aspect.  Normative whole life may also have an investment aspect, except that the funds are non-participating.  They may also cover disability, terminal illness, or critical illness, or combinations of them.

Term life plans provide coverage for a specific term, and may be renewable.  At the end of the term, coverage ceases, and these plans have no cash or surrender value.  They may also cover disability, terminal illness, or critical illness, or combinations of them.  Additionally, it is possible to buy coverage for disability, terminal illness, or critical illness, or combinations of them, but without a death benefit.  These plans may be either term, or whole life.

General insurance is any insurance that is non-life related, and covers loss of materials, assets, earning capacity due to damage to reputation or license, and such like.  In summary, everything else.