Investing in life insurance is like fixing a leakage in your roof! The longer you wait, the more expensive it can get! Money management is a tricky business, especially with so many financial products encircling us, demanding our attention. We want to highlight one such important financial product in today’s blog; Life insurance.
Term insurance plans, ULIP’s, endowment plans, and so much more. So many options, such little clarity!
Getting into the basics, life insurance is an agreement between the insurance company and the policyholder. The policyholder pays a particular premium value for a specifically agreed tenure in exchange for a sum assured in the event of the policyholder’s death. Different plans have different features, payout schemes and benefits. This blog aims to draw awareness about the different types of life insurance policy.
In general, there are 7 types of life insurance in India:
- Term Life Insurance
- Unit Linked Plan (ULIP)
- Endowment Plan
- Money-back plan
- Whole Life insurance cover
- Child Plan
- Retirement Cover
Read on to know the difference and dig deeper to invest in the best life insurance policy that meets your needs.
Let’s dive in!
Term Plan
Term insurance policy is one of the most widely known life insurance products, and given the inexpensive nature and low-cost, high coverage nature, it is widely preferred. One pays a fixed annual premium in return for an ascertained sum insured upon death. With a simple death benefit, one can safeguard their families, businesses and loved ones in their absence. This type of life insurance plan has its own perks. One can avail additional riders to submit the basic coverage. Some popular term plan riders include accidental cover, waiver premium, critical illness rider, terminal rider etc.
Unit Linked Plan or ULIP
Unit Linked Insurance plans have a ton of benefits. Under this type of life insurance, the premiums are partially invested in the insurance company’s funds and partially as a risk cover. Ideal for people with a mid-high risk appetite, one can cover the corpus amount on a ULIP calculator basis the tenure, amount and frequency of investments.
Endowment Plans
An endowment plan is an amalgamation of the insurance and investment sphere and is similar to ULIPs. While this plan is highly debated upon, the perks of an endowment life cover are that your premium amounts are invested. You can avail of certain perks and bonuses on the accumulated sum assured. This holistic value is paid to the family or nominee in case the policyholder survives the plan tenure. This traditional type of life insurance is known to have investment, insurance, and tax-saving benefits—ideal for the family’s salaried heads.
Money-Back Plan
Available for a tenure of 20 to 25 years, the policyholder receives payouts usually in a span of every 5 years or around specifically decided upon stage based events. As the name suggests, this payout is usually accompanied by accrued benefits and bonus on maturity value.
Whole Life Insurance Policy
This type of life insurance plan covers the policyholder in their lifetime or in some events for a period of 100 years. The nominee receives the death benefit, i.e. the sum assured in case of the policyholder passing away. On occasion, the policyholder survives beyond 100 years; he/she/they can avail the maturity amount themselves.
Child Plan
This type of life insurance plan helps create substantial capital for various stages of your child’s life, including educational studies (both domestic and overseas), finances for marriage etc. Some insurance plans waive the premium amount in case of death of the insured parent and offer annual or lump sum payouts after the child turns 18. By default, after reaching the age of maturity, i.e. 18 years of age, irrespective of death or the parent’s survival, the child can avail the maturity value. This plan is ideal for earning parents.
Retirement Policy
This life insurance plan is made keeping long term survival in mind. Under this type of life insurance, the policyholder pays a certain premium for a fixed tenure. The death benefit includes the payment to the nominee listed based on coverage. Alternatively, some insurers may also pay back 105% of the premiums. One can also avail annual, lump sum or monthly payouts in case of survival post-policy tenure, usually after the age of 60.
From all the above-listed options, a term plan is the most basic form of life insurance. Evaluate all your needs, thoroughly analyse the benefits, and read the policy coverage’s fine prints before you sign the dotted lines.
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Got insurance on your mind? Cover 360 is here at your fingertips!
Remember, investment in life insurance today will keep the financial distress of your loved ones at bay!