Life Insurance policies are very popular in India and are broadly classified into seven different categories. The plans are based on their risk coverage and the investment component. Further, each category has its own specific purpose and covers all the different types of risks and requirements of the insured.
Therefore, it is important for you to know the different types of life insurance policies available in order to make the right choice.
Following are the seven different types of Life Insurance Policies available in India:
Term Insurance policies are the purest and simplest form of life insurance policies. Some features of Term Insurance policy are:
- Easy to understand
- Have a lower premium compared to any other category of life insurance policy
- Higher payout benefits
- Purchased for a fixed period of time
It is known as the purest form of life insurance policy because it does not provide any maturity or cash benefits, but only covers the risks of the insured. The payout from the policy happens only after the occurrence of the event during the policy term.
Endowment life insurance policies provide the benefit of both insurance coverage and savings to the insured. Under the policy plan, if the insured outlives the policy term, then full maturity benefits are paid to the insured.
In case of death of the insured during the policy term, the death benefit is payable to the nominee.
This is the most popular life insurance policy in India, as it offers both insurance and saving component to the insured.
Money Back Life Insurance Policies
Money Back Life Insurance Policy is very similar to Endowment Policies. The only difference is, the policyholder is paid survival benefits which are declared at a regular interval of time.
Whole Life Insurance Policies
The whole life insurance policy provides life coverage for the whole life to the insured, and the maturity benefits are paid to the nominee after the death of the insured.
If the policyholder outlives the age of 100 or the policy term, the insurance company pays the matured endowment coverage to the insured. The premiums for whole life insurance policies are higher compared to any other category of life insurance policies.
Unit Linked Insurance Policy (ULIP)
ULIPs are a recent introduction in the life insurance segment which is a combination of both insurance and investment. This policy allows the insured to create wealth in addition to insurance coverage.
The policyholder is allowed to select the fund type for their policy plan, according to their risk appetite. Under the plan, the part of the premium is invested in bonds, stocks, ETFs and other categories of marketable security to generate wealth.
Further, ULIPs allow the policyholder to partially withdraw during the tenure of the policy. And, at the time of maturity, the policyholder is paid the net value of the fund, prevailing on the day of the maturity.
Child Plan is another form of the life insurance policy which helps to secure the future of your child through building a corpus to fund for child’s education and marriage. The maturity benefits of Child Plans are paid after the child attains the age of 18
Child Plan ensures the security of your child’s future, in the event of the death of the insured parents, through waiving off the future remaining premiums as well as provide a monetary benefit to the nominee during the policy period.
As the name suggests, the Retirement Plan helps to accumulate wealth and become financially independent after your retirement. The maturity payout is done after the insured attains the age of 60 and is disbursed in the form of an annuity or lump sum, as instructed by the policyholder.
In case of death of the insured, the nominee will be entitled to the death benefits.
Buying a life insurance policy is a very important decision which includes a lot of technicalities which you need to understand. And, knowing the basics or types of different life insurance policies helps you in making the right choice, thus providing maximum risk coverage.
Therefore, having the right life insurance policy ensures the protection of your family and also provide you with greater peace of mind.