Having the best life insurance by your side provides you with peace of mind, as it provides your loved ones with financial security after your death. Most people consider life insurance to be one of the most essential components of a comfortable, hassle-free lifestyle.
A life insurance policy would not only ensure that one’s dependents would be taken care of in the event that they were no longer alive, but it would also allow them to build substantial wealth to achieve their financial goals in the future.
Many people end up in this situation because they do not understand types of life insurance plans and the jargon surrounding them. To help those who are searching for information, here is a succinct summary of the various types of life insurance policies in India.
What Are The Types Of Life Insurance?
1. Term Life Insurance or Term Plan
In this policy, only death benefits are offered, there is no maturity benefit. Term plans are meant to offer financial security to the beneficiaries in the unfortunate event of the death of the policyholder.
There is no doubt that term life insurance is the simplest type of life insurance.
It offers protection for a specified time frame and is a pure coverage plan. The nominee receives the predetermined death benefit if the insured person dies during this period. In certain term insurance plans, the policyholder can receive a return of premiums if he or she outlives the policy term.
Additional riders such as Accidental Death Benefits and Child Support Riders can also be added to a term plan to increase the amount of coverage offered.
2. Whole-Life Insurance Plan
Term insurance, on the other hand, covers the insured only for a specific period, while whole life policies cover an insured until their death. If your financial situation and risk appetite allow it, you can choose between participating and non-participating life insurance types as per your preferences.
In comparison, whole life insurance with participating dividends generally costs more, but dividends are paid to policyholders regularly. Non-participating policies have lower premium rates but do not provide dividends to the policyholder.
3. Unit Linked Insurance Plan
In addition to providing a life insurance policy, a portion of the premium paid is put toward investing in Equity and Debt funds. Due to their versatility, ULIPs enjoy a high level of popularity among the different types of life insurance policies available. In addition to being tax-saving instruments, ULIPs are also touted for their tax-saving benefits due to the exempt status of their proceeds under LTCG (long-term capital gains).
4. Child Insurance Plan
In these types of life insurance plans, an insurance company waives the premiums upon the death of the policyholder (in most cases the parent) and pays out after maturity (to the child). A child insurance plan is one type of life insurance available.
A policy of this kind serves one particular purpose: to protect the policyholder’s child financially if their unfortunate death. In the absence of the insured, this plan is ideal for providing for the child’s future needs. In addition to covering their child’s education, marriage, and other financial goals, parents can purchase child insurance plans to meet their financial requirements.
5. Money-Back Plans
Money-back policies provide policyholders with periodic Survival Benefits in the form of a percentage of the total sum assured and bonus accrued until the policy matures. As one of the most advantageous life insurance policies, money-back policies provide policyholders with a percentage of the total sum assured.
Policyholders are granted the remaining balance of the Sum Assured at the maturity of their policy. The policyholder’s dependents, however, will receive the entire Sum Assured if the policyholder dies during the term.
6. Retirement Plans
A pension plan is a financial plan that offers money in the form of lump sums or monthly payments so that retirement can be financially independent and worry-free. Pension plans provide financial stability and security after retirement through a type of life insurance. Those who retire from employment lose their regular source of income.
You can create a regular stream of income by investing in retirement plans. After retirement, you will be able to cover your expenses with the investment plan if you continue to invest. During your working life, you must invest a certain portion of your income regularly into a retirement plan. Upon retirement, you will receive a regular income stream from the amount that you have created over the years.
7. Group Insurance Plan
In a group life insurance policy, a group of people is covered together. A group insurance policy covers a minimum of ten members, unlike individual life insurance policies. Group Life Insurance policies can be purchased by employers, banks, corporates, and other homogenous groups.
Banking and lending institutions would like to keep the debt off of the borrowers’ families after their death, while employers like to offer financial coverage to their employees’ families.
8. Savings & Investment Plans
Plans such as Savings and Investments can provide you and your family with the assurance of lump-sum funds in the future. These plans provide a good way to meet your short and long-term financial goals, as well as offer an inexpensive way to protect your family. Both traditional and unit-linked plans are included in this broad classification.
9. Which Life Insurance Types Are Right For You?
Life is most precious when you have a family who cares for you. To provide for your loved ones’ emotional and financial needs, you do everything within your power. You might feel it is of the utmost importance to save money for your child’s education as an Indian parent.
The best life insurance providers will help you provide your child with the best options for securing various life milestones. If something unfortunate should happen to you, you must protect your loved ones’ financial future to ensure that they will be cared for and happy throughout their lives.
With the various types of life insurance plans available in India, you or your family does not have to worry about monetary issues in the event of a medical emergency. Therefore, make sure you zero in on a policy soon to provide financial safety to your family and accomplish your life goals.