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Business News/ Money / Personal Finance/  What are the different types of life insurance policies?

What are the different types of life insurance policies?

There are various types of insurance policies such as term life and child insurance plans. Which one is better suited to you, and what are its key features, we decode it for you here.

A legal contract between an insurer and a policyholder is known as life insurance. (Photo by Vlad Deep on Unsplash )Premium
A legal contract between an insurer and a policyholder is known as life insurance. (Photo by Vlad Deep on Unsplash )

A legal contract between an insurer and a policyholder is known as life insurance. In exchange for the premiums paid throughout the policyholder's lifetime, a life insurance policy ensures the insurer pays an amount of money to designated beneficiaries when the covered policyholder dies.

If you want to provide a sense of security for your loved ones, you should consider adding life insurance to your financial strategy. A life insurance policy's proceeds might be used to cover last costs, pay off debts, or cover day-to-day expenses. What are your needs and what do you want a policy to do for you may determine whether or not life insurance is a good investment.

It's critical to understand the many sorts of life insurance plans available before choosing whether or not they're a smart investment. Let us dig deeper and understand the different types of Life insurance policies.

Term Insurance Plan

Term insurance plans, as the name implies, are those that are acquired for a certain length of time, such as 10, 20, or 30 years. Because these plans do not have any cash value, they do not have any maturity advantages, thus they are less expensive than conventional insurance. Only when the event occurs does this policy become advantageous.

Term Insurance Plan with Premium Return

As the name suggests, this plan is an extension of term insurance that reimburses your premiums if you live until the end of the policy period. This plan is also referred to as Endowment Policy. The sole advantage that endowment policy has over the term insurance plan is that the former comes with the added advantage of a lump sum payment if the policyholder survives until the maturity date.

Unit Linked Insurance Plan

A ULIP is one of the forms of life insurance plans that meets both of these criteria.In addition to providing life insurance, these plans allow policyholders to accumulate wealth. The premium paid into this policy is split into two parts: one for life insurance and the other for wealth accumulation. This plan allows you to withdraw the portion of your money allocated into the wealth accumulation division.

Money Back Policy

The goal of purchasing an insurance policy in India for your loved ones might be to accumulate cash through time. However, most forms of life insurance do not allow for withdrawal of cash before the policy's term expires. It is here that a money back policy comes into play in resolving the liquidity issue.This insurance offers a variety of survival advantages that are distributed proportionally over the policy's duration.

Whole Life Insurance Policy

Unlike other plans that expire after a certain length of time, the whole life policy covers the insured for the rest of his or her life by providing survival benefits. The policyholder can withdraw a portion of the money or borrow a certain amount in this sort of insurance. A whole life insurance plan differs from other forms of life insurance in that it covers the insured for the rest of his or her life, up to the age of 100.

Child Insurance Plan

A child plan is a combination of investing and insurance that assists you in meeting your child's financial needs. A child insurance policy can support you in building wealth for your child's future requirements, such as school. You may begin investing in these schemes as soon as your child is born and it provides you with the option of investing your hard-earned money in a variety of funds based on your financial situation and objectives.

Annuity/ Retirement Plan

Retirement or annuity plans are insurance policies that provide financial stability and aid in the accumulation of wealth once you retire. The sum collected in the form of a premium is accumulated as assets under this policy and given to the policyholder in the form of income via annuity or lump payment, depending on the insured's preferences.If the person insured dies unexpectedly during the insurance term, the nominee receives the insurance benefits.

Losses are unavoidable in life, and the extent to which they affect our lives varies. By providing cash compensation for insured losses, insurance helps in reduction. There are many different forms of insurance, but there are a few that are more important than others. Therefore, even if you're buying life insurance solely for investment purposes, it's still a good idea to research around for the finest life insurance providers to guarantee you receive the greatest deal.

Important Life Insurance terms who should know
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Important Life Insurance terms who should know

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Published: 26 Apr 2022, 02:48 PM IST
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