CATEGORISATION OF LIFE INSURANCE

KEY WORDS

> Main policy Long term care insurance

> Group insurance Insurance rider Individual insurance

> Modern life insurance Single premium

> Regular premium payment Elemental life insurance

> Reduced premium payment Main policy

> Multiple life insurance Traditional life insurance 

1. The study of life insurance is an applied science. Its subject, life insurance has been created based on practical considerations centuries ago (or thousands of years ago – according to other opinions) and it has developed by practical challenges, not theoretical discoveries.

2. Because of this, the theory also tried to follow and reflect these challenges and did not aim at the axiomatic structure of the “classical” sciences (primarily mathematics and physics) that serve as examples to other sciences. This way – although it would seem as a necessary first step and basic requirement – there is no widely accepted common categorisation of life insurance, but it changes from author to author, is strongly inferior to the later matter, and usually gives an ad-hoc impression. Now let’s look at a few examples from the Hungarian and the English literature.

3. László György Asztalos in 1995 stated – basically agreeing to the above classifications in the chapter “the categorisation of life insurances”93, that “An individual life insurance policy can only be categorised, professionally defined by applying at the same time (using a combination of) several, at least the following 6 aspects (groups).” These are:

A. the purpose of the insurance policy,

B. the date(s) related to the insurance policy, or the term,

C. the mode of benefit payment,

D. the number of insured lives,

E. the technique of premium payment,

F. the return of yields. Variations of the first aspect are: „The purpose of the insurance is in every case that the insurer takes over the risk caused by the uncertainty of the duration of life. All insurance products can be listed under one of the 4 basic types. 

 4. Some of the policies you will encounter will fall easily into one of these sections, being entirely either life insurance, sickness insurance, or investment-based, but others may fall under two or even all three sections. Consider the following examples, and decide where each of them could most appropriately be placed in that chart

5. The simplest form of life insurance protection is yearly renewable term (YRT) insurance.”97 It gives the following definition of this type of insurance: “Yearly renewable term life insurance provides coverage for a period of one year only, but guarantees the policyowner the right to renew (i.e., continue) the policy even if the insured suffers poor health or otherwise becomes uninsurable. Each year’s premium pays the policy’s share of mortality costs for the year.