- The whole life insurance policy also includes a saving element.
- Under a term plan, you pay premiums for a specific term, and the insurer pays the insurance coverage amount or the death benefit to the chosen nominee in case of your demise within the duration of the policy.
- Endowment plans are a combination of insurance and savings.
We all must have thought of buying life insurance policy at some point as we know its importance in our lives. But the problem here is which form of life insurance should we choose for making our future secure. Some say that a life insurance policy with maturity benefit is fruitful, whereas others are in a view that a pure protection plan is necessary. Then you find out that some insurance policies come with expensive premiums, and some have affordable premiums. As a result, you get confused and end up buying a wrong life insurance policy.
Therefore, it becomes essential to know and understand different types of life insurance policies in India. So, let’s start with defining what a life insurance policy is all about.
Life insurance is an agreement between the insured and the insurance provider. The insured person is liable to pay a premium to the insurance company for a certain number of years, and the insurer promises to pay the insurance coverage amount to the policy beneficiary upon the demise of the policyholder. Some insurance policies pay maturity benefit to the policyholder if the insured survives the term of the policy. However, the terms and conditions vary from policy to policy.
There are primarily five different types of life insurance policies in the market. Read through to know their benefits and features.
Whole Life Insurance Policy: As the name suggests, this form of life insurance offers you coverage for your entire life. In a whole life insurance policy, the policyholder is required to pay the premium regularly, and the insurance company in return pay out the sum assured in case of the death of the policyholder. The whole life insurance policy also includes a saving element.
Features of whole life insurance policy:
- This kind of life insurance policy does not have a specified term, unlike other insurance policies.
- It also includes a saving component apart from the death benefit amount, so you can re-invest that component letting the cash amount increase. Additionally, you can avail a loan against the saving element as well.
Term insurance policy: A term insurance is a pure protection plan and is very simple to understand. Under a term plan, you pay premiums for a specific term, and the insurer pays the insurance coverage amount or the death benefit to the chosen nominee in case of your demise within the duration of the policy. It does not offer any maturity benefit; however, the term plan with return of premium (TROP) pays back the premiums paid if you survive the policy term.
Features of a term insurance plan:
- It provides high life cover at affordable premium rates as compared to other life insurance policies.
- TROP plan offers maturity benefit in the form of the sum of total premiums paid without any interest.
Endowment Policies: Like whole life insurance policies, endowment plans are a combination of insurance and savings. Under this policy, the premiums are required to pay for a specific term. In return, the insurance provider promises to pay the insurance coverage amount to the policy nominee in case of the untimely demise of the policyholder. And if the insured person survives the duration of the policy, then he or she gets a lump sum pay-out as the maturity benefit amount.
Features of Endowment Policies:
- Endowment comprises of saving component along with the sum assured amount. You can opt for this life insurance policy to make goal-based savings, and during emergencies, you can avail loan against that saving component.
Moneyback policy:Moneyback policies are also an amalgamation of protection and savings.But the main benefit of this life insurance policy is that a part of the sum assured amount is paid at a regular interval during the tenure of the policy. The remaining amount, along with additional benefit, is paid at the maturity. This benefit is not available in any other life insurance plans. However, suppose the insured person dies within the tenure of the policy. In that case, the entire coverage amount is paid to the beneficiary apart from the survival benefits that the policyholder has already received.
Features of Moneyback policies:
- The primary advantage of moneyback policies is the payment of a part sum assured that you get at regular intervals.
Unit Linked Insurance Plans (ULIPs): Unit linked insurance plan is a combination of insurance and investment. Under this life insurance policy, the policyholders can select whether he or she wants to invest in debt or equity and in what percentage. Although there are no assured returns, a lump sum amount is given to the insured person at the maturity of the policy. And if the insured dies within the tenure of the policy, then the insurance company pays the sum assured amount to the nominee.
Features of ULIP:
- Although there is no guaranteed return, ULIP provides a higher return than the traditional life insurance policy along with the saving component.
The bottom line of the blog is that Life insurance policy is a necessity to secure your loved ones. However, you should thoroughly know different types of life insurance policies to make a wise buying decision. Additionally, you also need to know the purpose of buying a life insurance policy to gain the maximum benefit so that you select the right life insurance policy for yourself. If you are not sure about choosing from the different types of insurance policies, then you can visit BimaKaro.in and speak to their insurance experts.