What Are the Different Types of Life Insurance Policies?

Types of Life Insurance Policies

Insurance sector is one of the fastest growing sectors in India and the numbers of policy takers are expected to increase by more than 4% in the following years. Though initially was managed by the Government, India allowed private companies to solicit insurance policies in 2000 which widened the horizon of Insurance sector.

Life, as we know, is unpredictable and it is important to be informed about the life insurance policies to secure our family financially.

What is a Life Insurance Policy?

Life insurance is an agreement between the insurance company and the policyholder whereby the company provides financial compensation to the family of the latter for death, illness or damage. The insurer needs to pay the entire amount covered in the policy to the nominee or policyholder and the insured needs to pay a specified premium amount as per the terms throughout the entire tenure. Life insurance gives a complete financial protection to the family of the policy holder.

Different types of Life Insurance Policies

The life insurance providers offer varied policies with unique features, benefits and most importantly terms and conditions suiting the requirement of their customers.

Term Insurance Plan: This is the cheapest life insurance policy which is purely a risk-cover. As per the name, the insurance is covered only for a set period. If the policyholder dies within the duration of the policy term, the beneficiaries get the sum assured under the policy. If the insured survives the term plan, there is no pay out after the maturity. However, the policy buyer can discontinue the plan or extend it further.

Endowment policy: This insurance policy is different from the term policy in only one aspect that it pays out the sum assured at the maturity period even if the insured survives the tenure. The charges and premiums could be higher under this policy.

Whole life insurance policy: As the name suggests, this life insurance policy covers the entire life of the policyholder. The premium can be paid till the death of the insured and there is no pre-defined policy tenure. The matured amount is paid to the beneficiaries after the death of the policyholder. The insured can also get tax benefits under this plan.

Money back policy: This is similar to endowment policy. Under this plan, a certain amount from the sum assured is paid out to the policyholder over the tenure of the plan. The policyholder gets the entire matured amount after completing the tenure. If the insured dies before the term, the beneficiaries get the sum assured.

Unit linked insurance plans: It is an integrated plan that combines both insurance and investment. Under this plan, an individual can get the sum assured at the maturity date just like endowment plan. This plan allows the policyholder to invest a part of the insurance amount at stocks, mutual funds or bonds. It gives insurance protection and investment options to the policy buyer.

Children’s policies: This type of insurance policies is taken purely for the benefit of the children. It can help the parents to save for their children which can be used for their higher education and various other purposes.

Final Note

The purpose of insurance policy is purely to give financial protection to your family members in your absence. To make it work best for you, it is recommended to choose the policies that give maximum benefit to your loved ones after you are gone.

 

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