Investing in life insurance is an important decision for yourself and your family. The insurance policy protects your loved ones in case of an untoward incident. It provides financial security to your family members during your absence. A life insurance plan can be divided into a pure risk plan or a combination of investment and insurance. If you are not sure which to choose, you need to understand the different types of plans available in the market in order to make an informed decision.
Different types of insurance policies
Discussed below are the various types of insurance policies available in India.
This is the most basic form of life insurance plan. It is an affordable plan that covers the risk of death for a particular term. In a term insurance plan, if the policyholder passes away during the policy term, the company will pay a death benefit to his nominees. In case the policyholder outlives the policy, he receives no maturity benefits.
This plan is a blend of an online savings plan and an insurance cover. A specific amount is set aside for life cover and the remaining money is invested by the company. In this plan, in case of survival of the term, the company will offer maturity benefits. An endowment plan may offer bonuses either at the time of maturity or in case of a death claim. It is a low-risk low-returns plan.
Unit-Linked Insurance Plan (ULIP)
This is a combination of insurance and investment. The premium amount paid towards ULIP is divided into two parts. One part is used as a risk cover while the second part is invested in stocks and bonds. With a ULIP, it is possible to invest the amount in different investment instruments based on your risk appetite.
Money back life insurance plan
This type of life insurance policy provides you with a certain amount of the total sum assured after specific intervals as a survival benefit.
This life insurance plan will help build a corpus for retirement. It will ensure that you live financially independently without any worries. The death benefit will be the current fund value or the coverage of 105% of the premium amount paid, whichever is higher. A retirement plan is ideal for long-term savings.
Whole life insurance plan
This plan will provide you with cover throughout your entire life and the duration can be until you reach the age of 100. The sum assured will be fixed while purchasing the policy and it will be paid along with a bonus to the policyholder’s nominee. If the insured outlives the age of 100, the insurer pays a survival benefit on maturity.
This plan will be helpful for your child’s future growth and development. The corpus can be used for meeting various life goals such as higher education or wedding that you would want to accomplish for your child.
Before you buy online term insurance or other life policies, you need to keep your short-term and long-term goals in mind. Consider all the different types of insurance policies in India and then make a wise investment decision.