Different Types of Life Insurance Policies

Life Insurance

Broadly, the life insurance policy can be divided into two categories –

1) Pure life policy

2) Life insurance

Here are details about various types of life insurance policies that are available in India.

a) Term Life Insurance – pure protection plan :

Term insurance is the most basic, straightforward, and cost-effective type of life insurance. It’s a pure protection plan with a high level of life insurance at a low cost. In the event that the insured person dies within the policy’s term, the policy’s nominee receives death benefits in the form of a lump-sum, monthly, or partial payout.

If the policyholder lives to the end of the policy’s term, there is no maturity benefit. You can, however, add riders to the policy to broaden the coverage. The fundamental advantage of a term life insurance policy is that it provides financial security to the insured’s family in the event of his or her untimely death. The considerable death benefit assists the deceased’s family in comfortably maintaining their lifestyle while also paying off any outstanding liabilities, children’s schooling, marriage, or ordinary home expenses.

b) Whole Life Insurance – life coverage for the entire life :

A whole life insurance policy covers the insured for the rest of his or her life, or up to the age of 100 in some cases. It’s not like a term plan, which covers you for a set period of time. Whole life insurance premiums are greater than term life insurance premiums. The coverage amount, also known as the sum assured, is established at the time of purchase and paid to the policy beneficiary, together with bonuses, upon the insured person’s death.

However, if the insured lives longer than the policy’s term, the firm will pay the maturity benefit. It also allows you to withdraw a portion of your money after the premium payment period has ended.

c) Unit Linked Plans (ULIPs) – Insurance and investment :

A unit-linked plan combines the aspects of insurance and investment. The premiums paid for ULIPs are used to partially fund the coverage while the rest is invested in various funds such as bonds, stocks, market funds, and debts, among others.

However, you should invest in various funds based on your risk appetite through a completely transparent life insurance provider.

d) Endowment Plans – Insurance and savings :

Traditional life insurance policies with a combination of insurance and savings components are known as endowment plans. Endowment plans, on the other hand, have lower risks and returns than other investment options. Under endowment plans, a portion of the money is kept for insurance coverage and the rest is invested by the insurance company. The maturity benefit is paid to a policyholder who lives longer than the policy’s term.

Endowment plans may also offer bonuses on a regular basis, which are paid to the beneficiary during a death claim or upon policy maturity. It’s excellent for folks who aren’t afraid of taking risks with their money.

e) Money-Back Life Insurance – Periodic returns along with insurance coverage :

In a money-back plan, the policyholder receives a percentage of the sum assured as a survival benefit at regular periods. This type of life insurance earns bonuses from time to time, according on the insurer’s announcements. It’s an excellent technique to achieve short-term financial objectives.

f) Retirement Plan – helps in a comfortable life post-retirement :

This type of life insurance, as the name implies, is a terrific strategy to establish a corpus for the post-retirement era while also ensuring your financial independence. This makes it possible for you to live comfortably in your older years without relying on others. If the policyholder dies during the policy term, the insurance company pays the policyholder’s nominee right away. The death benefit will be greater than the amount of coverage or 105 percent of the premiums paid in this case.

g) Child Plan – Fulfils child’s future goals :

Child planning can help you achieve your child’s life goals, such as schooling and marriage. This type of life insurance plan aids in the accumulation of funds for the child’s future. After the child turns 18, the majority of child plans give annual instalments or a one-time payout. In the event that the policyholder dies during the policy’s term, the insurance company will make an immediate reimbursement. In such circumstances, specific kid plans waive future premiums as well, but the insurance remains in effect until it matures.

 

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