Investing in term insurance is the best decision that you can make. It is an investment, which will help to secure the financial future of your loved ones in case an unfortunate incident takes places. Life insurance can be categorized as a risk coverage plan and as a combination of investment and insurance. If you are not sure which plan to opt for, it is best to understand the different types of insurance policy and then make a decision.
Types of insurance plans
Explained below are the five different types of insurance policies.
- Term insurance
A term plan offers pure risk cover. There is no element of investment here. It is a plan, which covers you for life for a specific period if something happens to you during this duration. In such a scenario, the entire sum assured will be paid to the family. In the case of survival, there are no maturity benefits in a term insurance plan. It is a pure risk plan with high coverage and low premium amount.
- Endowment policy –
An endowment plan is a type of life insurance plan that offers a combination of investment and insurance. A specific amount will be set aside for insurance and the rest will be invested. If you survive the policy term, the company will pay a maturity benefit. In case of death, the death benefit will be paid to the nominee. This plan is ideal for those who have a low-risk appetite and are looking for an investment option.
- Retirement plan
As the name suggests, a retirement plan will help build a corpus for your retirement. You can enjoy the golden years of your life without any financial stress or worry. It will provide a one-time payout or annual installments after the age of 60.
- Child plan
A child plan is an insurance plan specially designed for your children. It will help build a corpus for their future. You can build the fund for the education and marriage of children and it provides a one-time payout or annual installments after the age of 18. In case of an untimely demise of an insured parent, immediate payment will be made by the insurance company.
- Unit-Linked Insurance Plan (ULIP)
One of the most important types of insurance policy, ULIP is a combination of investment and insurance. The premium amount paid towards ULIP is divided to cover the risk of death and to invest in your preferred funds. The amount is invested in funds in the stock market based on your risk appetite.
Now that you are aware of the top five types of life insurance plans, it is advisable to consider your financial health and requirements before making a decision. The right type of insurance plan will be your umbrella on a rainy day. Hence, make a well-informed decision.