Types of Life Insurance Policy
Nobody likes to talk about death; however, life is uncertain and you need to plan in case of an unfortunate event. Life insurance is an excellent way to protect the financial stability of your family in your absence.
Life cover may be a pure risk or a combination of insurance and investment. With the different kinds of policies, it may be confusing to determine the right plan to purchase.
Here are different types of life insurance term plans that you may choose from:
Term life insurance
It is the simplest type of insurance cover and is the most affordable way to procure higher coverage. Term plans are pure life covers where the death benefits are paid to your beneficiaries in case something untoward happens to you during the policy period. You may enhance the coverage using riders for an additional premium. The death benefits may be paid as a lump sum or regular payouts or a combination of the two.
Unit-linked insurance plans (ULIPs)
ULIPs combine life cover with investment returns. A certain component of the premium is used to provide insurance coverage. The balance is invested in various instruments such as equities, bonds, market funds, and other products. The amount invested in various financial products depends on your risk profile and personal requirements.
These plans are types of insurance policies combining life cover and savings. A portion of the premium is retained to provide life cover. The insurer invests the balance amount. These insurance policies provide maturity benefits if you survive the policy term. Additionally, endowment plans offer periodic bonuses payable either at the time of maturity or included in the death benefits paid to your beneficiaries. If you are looking for long-term savings without assuming high risk, endowment plans are recommended.
Money-back life insurance
Such policies are unique types of insurance in India that pay some portion of the sum assured at regular, pre-determined intervals. These insurance policies may also pay bonuses as declared by the insurers from time to time. If you want to earn a regular income at periodic intervals to meet certain short-term goals, money back plans are an excellent option.
Whole life insurance
A whole life plan offers coverage for your entire life or until you reach the age of 100. The sum assured is determined when you purchase the policy and is paid to your beneficiaries in case of an unforeseen circumstance. However, if you survive beyond 100 years, the insurer pays the policy benefits as matured endowment coverage. You may also opt for partial withdrawals at the end of the premium paying term.
These policies allow you to accumulate corpus to meet child-related goals like higher education and wedding. Such plans may pay regular installments or a lump sum payout once your child attains 18 years of age. In the case of an untoward event during the policy term, the insurer may either pay the entire benefits or waive the balance premiums payable until maturity.
Retirement plans are crucial to ensure that you enjoy financial independence even after you retire. Majority of such policies offer regular payouts post-retirement. If you do not survive until maturity, the death benefits are paid to your beneficiaries.
The aforementioned policies are some kinds of life insurance savings plans while term insurance is a pure life cover. It is recommended that you seek advice from an expert to make the right decision.