Types Of Life Insurance Policy: Today a person has many options to choose from when it comes to financial planning. Most people focus on the wealth creation aspect and compromise on the security element. Life insurance should be the first step in financial planning in view of rising inflation, lifestyle changes and moving to nuclear families.
Types Of Life Insurance Policy:-
1. Term Life Insurance
Term life insurance is a type of life insurance that provides a death benefit to the beneficiary only when the life insured dies during a specified period. If the policyholder survives the term or till the end of the term, the insurance coverage ceases to be of value and payment or death cannot be claimed. Term life insurance is income replacement that remains active for a specified number of years. Term life insurance (one of these) is the most affordable type of life insurance. It can be further classified into level term insurance, decreasing term life insurance and rising term life insurance.
2. Whole Life Insurance
Whole life insurance is an insurance plan that provides you coverage for life provided the policy is in force. Whole life insurance policies also have a cash value component that increases over time. You can withdraw your cash value or take a loan against it as per your convenience. Also, in case of your unfortunate death before the loan is paid off, the death benefit paid to your beneficiaries will be reduced.
3. Endowment Policy
An endowment policy is defined as a type of life insurance policy that is payable to the insured if he is still living on the policy’s maturity date, or to a beneficiary otherwise. Endowment plans offer you a dual combination of protection and savings. In this policy, if the Life Assured dies during the term of the policy, the nominee receives the Sum Assured and Bonus or Participatory Benefit or Guaranteed Addition, if any. The bonus or benefit is paid for the number of years the life insured survives the policy term.
4. Money Back Policy
Money back policy gives you money during the policy term. It gives you a percentage of the Sum Assured at regular intervals during your policy term. If you continue beyond the term of the policy, you will also receive the balance portion of the corpus and the bonus accrued at the end of the policy term.
but in case of an unfortunate event before the expiry of the full term of the insurance policy; Beneficiaries are entitled to receive the entire sum assured irrespective of the number of installments paid. Money back policies are the most expensive insurance option offered by insurance companies as they provide returns to the insured during the policy term.
Money back policy gives a way to an individual to plan the course of his life with the requisite amount in regular intervals. With the help of this policy, schemes like children’s education, children’s marriage can be implemented in a better way.
5. Savings and Investment Schemes
Savings and investment plans are types of insurance plans that provide the assurance of a lump sum amount for future expenses of you and your family. Providing an excellent savings tool for your short-term and long-term financial goals, these plans also assure your family of a certain amount through insurance cover. It is a comprehensive assortment that covers both traditional and unit linked schemes.
6. Retirement Plans
These plans provide you income during retirement, called retirement plans. These plans are offered by life insurance companies in India and help you build a retirement corpus. On maturity, this fund is invested to generate a regular income stream known as pension or annuity.
7. Unit Linked Insurance Plan – ULIP
ULIP is a type of life insurance plan that offers you the dual benefit of safety and flexibility in investment. It is a type of life insurance where the cash value of a policy varies according to the current net asset value of the underlying investment assets. The premiums paid are used to purchase units in the investment assets chosen by the policyholder.
Also read: What are the benefits of life insurance?
8. Child Insurance Policy
A child insurance policy is a savings cum investment plan designed to meet the future financial needs of your child. It allows your children to live their dreams and gives you the advantage of starting investing in a children’s plan right from the time the child is born and has a provision to withdraw the savings when the child becomes an adult. Some child insurance policies allow intermediate withdrawals at fixed intervals.
Life insurance is not just for meeting the daily expenses of the family in the absence of the breadwinner. It should be capable enough to support the family during times of major financial exigencies. Hence, one should always choose one or two of the best types of life insurance that can support his family at different stages of life.