The importance of a life insurance policy in financial planning and establishing security in one’s life cannot be underestimated. When one is used to taking care of the financial needs of their family, the tendency to worry about what would happen to them in one’s absence is natural. A life insurance policy is a safe and secure way to ensure that your family lives a financially worry-free life in case of your absence. To suit the ever-increasing and varying needs of the population, insurance companies in India have introduced a list of different life insurance policies. Are you looking for a policy that would be the most suitable for you? Then, a look at the following may help.
Types of life insurance policies
- Term insurance
Term insurance is the most popular and affordable life insurance plan in India. The distinct feature of term insurance is that it offers a life cover for a limited period only. This period could be anywhere from 5 years to 30 years to 45 years. The longer the term, the more will be the premium. Generally, term insurance premiums are quite low due to its limited tenure offerings. If you pass away during this tenure, your family receives financial compensation. You can also receive the return of all your premiums paid to date if you opt for the return of premium feature with your term plan and outlive its maturity.
- Whole life insurance
As compared to term insurance, whole life insurance offers coverage for the entirety of the policyholder’s life. The policy ends with the passing away of the policyholder. Some insurers may offer maturity benefits if you cross a particular age limit. Whole life insurance plans, along with term insurance, are pure protection plans. There is no savings or investment element provided with these plans.
A life insurance premium calculator can help you get an estimate of the premium you will be paying for a whole life policy versus a term life policy.
- ULIPs (Unit-Linked Insurance Plans)
With a ULIP policy, you get an opportunity to direct your money in two directions – insurance and equity investment. Your ULIP premiums go towards building your life cover as well as towards investment in market-linked instruments. You can choose to invest in equity or debt instruments as per your risk appetite and even switch between them during the policy duration depending on the market performance and the returns you want. ULIPs have a lock-in period of five years.
- Endowment plans
Like ULIPs, endowment plans cover two aspects of financial planning with one product. However, unlike ULIPs, endowment plans are not concerned with investment. They offer a mixture of insurance plus savings. This is ideal for those who are looking for a life cover and returns but do not want the risk of investing in market instruments. If you outlive the maturity of an endowment plan, you receive lump-sum benefits that can help you meet the various financial goals of your life. A life insurance premium calculator can be used to estimate the premiums for these plans as well.
- Moneyback life insurance
This type of life insurance policy provides financial benefits to the policyholder during its term, and not just during maturity. The policyholder receives survival benefits beginning a few years after the purchase of the moneyback term insurance plan. Along with these survival benefits, you also get maturity benefits if you survive the maturity of this life insurance policy. If you, unfortunately, pass away, your nominees receive the death benefit pay-out. This pay-out does not consider any survival benefits given to the policyholder. It is a full-fledged amount (as stated in the policy documents).
- Group life insurance plans
Group term plans cover several members under one plan run by one single master policyholder. These are usually opted for by organisations and societies for their members. The premiums for these are often paid for in equal parts by the employee and the employer. Note that the life cover of a group plan is available for a policyholder as long as they are a member of the organisation.
- Age-related life insurance plans
Certain life insurance plans are meant for, and cater to, particular age groups only. Child insurance plans, for instance, are brought for a child, usually at their infancy, to help them become financially independent when they become older. Retirement life insurance plans, on the other hand, are bought by individuals who want a life cover as well as wealth creation during the golden years of their lives.
It is advised to contact your insurer in case of any doubts or queries.