A life insurance policy is an official, legal understanding between the insured and the insurance company. It entails that in case of the policyholder’s death during policy term, the nominees will receive the sum assured from the insurer. A life insurance plan is mandatory if you want to have a financially secure future for yourself and your family.
There are several types of life insurance policies that are available in India. They all offer their own unique benefits, and you can choose one or more based on your own requirements. These are the various different types of life insurance policies in India that you can choose from:
- Term Plan
This is an affordable life cover that provides death risk cover for a specific period of time. It is a simple type of life insurance that offers high coverage at low premiums. The death benefit that goes to the nominee in case the insured person dies during the policy term is payable in the form of monthly payouts and lump-sum amounts. Originally term plans do not offer payouts if the insured person outlives the policy term. However, some companies provide term insurance plans with return of premiums that payback all the paid premium even if the insured outlives the term.
- Whole Life Insurance
Whole life insurance provides cover for the insured person’s whole life, even up to 100 years. The benefit goes to the nominee at the time of the insured individual’s death claim, along with any bonus that might apply. Whole life insurance offers partial withdrawals after completing the premium payment term.
- Endowment Plans
Also commonly called traditional life insurance, this type of life insurance is a mix of saving and insurance. In endowment plans, a certain fixed amount is kept as insurance for life cover, and the rest is invested by the insurance company for lower risk. If the life assured happens to outlive the policy term, he/she is offered the maturity benefit. Bonuses are also offered periodically, which is paid on maturity or else to the nominee on a death claim.
Another mix of insurance and investment, ULIP is a good long-term investment option. The paid premium is partially used as an insurance/risk cover, and partly invested in funds. Depending on an individual’s personal risk appetite, he/she can choose to invest in various different funds offered by the insurance company. The accumulated amount is then invested in the capital market by the company – in equities, debts, bonds, market funds, and so on.
- Money Back Life Insurance
This type of life insurance provides survival benefit to the insured at periodic intervals, in which a certain percentage of the sum assured is paid back in those intervals. They also include the bonuses offered by the insurance company at any given time, which enable the policyholder to fulfil short-term financial goals.
- Child Plan
This type of life insurance provides financial coverage for your child’s future. Child plans help build a corpus for the child’s future education and requirements. They provide instalments annually, or as a one-time payout once the child turns 18. If the insured parent passes away during policy term, the immediate premium is paid by the company itself; some plans even waive off the premiums and the policy is continued till maturity.
- Retirement Plan
As the name suggests, this type of life insurance builds you a financial cover for retirement. The payouts are either in the form of annual instalments or a one-time payout after 60 years of age. If the life assured passes away during the policy term, then immediate payment is payable by the insurance company to the nominee.
These are the various different life cover plans that are available in India. You can research all of them and compare the benefits offered by each to make an informed decision and choose the plan/s most suited to your requirements. Everybody needs a financial security and planning, and a life insurance policy can become your lifeboat to navigate the sea of life.