Purchasing a life insurance policy that will give financial security to your family in the event of death, is an important thing to consider. There are a wide variety of life insurance plans available in the market, you can choose the one that best matches your requirement. Here is a brief guide to different types of life insurance plans offered in India. Know about them and select the right one at the right time.
Term life insurance
A term life insurance policy can be defined as a type of insurance that you can avail for a fixed period (number of years). A fixed sum of money is paid to the beneficiary only if the policyholder expires over the policy term. They are the most affordable form of life insurance because the premium amount paid under such plans is comparatively cheaper, unlike other life insurance plans.
Endowment life insurance
The endowment plans are the types of life insurance that offer a mix of insurance coverage and investment opportunity. Under such policy, the policyholder will receive a lump sum amount plus accumulated bonus in case the insured survives until the date of maturity.
Unit linked insurance plans (ULIPs)
It is a financial instrument that offers policyholders the dual advantage of insurance and investment. Under this insurance cover, policyholders have the freedom to capitalize on various investment tools like stocks, bonds, and mutual funds.
Whole life policy
It is an insurance plan that offers insured coverage for the entire lifetime. The sum assured is paid to the nominee when the insured dies. Under such policies, the policyholder has an option to partially withdraw from the sum insured or borrow against it. The maturity age for such a policy is 100 years. If the insured lives past the maturity age, the matured amount will be paid to the insured. The death benefit under this plan is tax-free.
Money back policy
It is a variant of the endowment plan with the benefit of liquidity. Under such policy, the insured will get a percentage of sum assured at regular intervals, instead of receiving the lump sum amount at the end of the policy term. In the event of the death of the insured individual, the nominee/beneficiary will get the entire sum assured along with the various survival benefits.
Annuity pension plans
Under such policies, the amount collected in the form of a premium is accumulated as assets and distributed to the policyholder in the form of income by way of an annuity or lump sum depending on the instruction of the insured.
Child insurance plans
Child insurance plans help to build capital for your child's future growth. Most of the child plans provide one-time pay-out or annual payments after the child reaches the age of 18 years. If the insured parent dies during the policy term - immediate payment is paid by the insurance company. Some of the insurance companies also waive off the future premiums on the death of the life insured and the policy continues till maturity.
This type of insurance plan helps you to build a substantial amount of capital to live a worry-free retirement life. Under such plans, policyholders can opt for annual payments or a single pay-out after the age of 60 years. In case of the death of the insured, the payment is made to the nominee either based on coverage, fund value, or the premiums paid.
So, these were the types of different life insurance policies that are offered in India. If you are planning to buy one, try to assess what you need it for. After knowing the purpose, evaluate all the above-given policies to understand which one will give you the maximum benefit.