Analyzing The Types Of Life Insurance Policies In India
Updated On Feb 18, 2022
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Life insurance is nothing more than a contract between the insured and the insurance company. In exchange for the insurer committing to pay a sum pledged to the nominee in the case of the policyholder's death, the policyholder pays a premium to the insurance firm. The insurer may pay a maturity bonus if the insured lives to the end of the term. The policy's terms and conditions, on the other hand, differ. We'd heard about the need of having life insurance and had considered getting it at some time. The problem is that there are just too many different kinds of life insurance policies available. You may have been taught about the maturity benefits of an endowment policy by a friend, but you later learned that a term plan provides greater coverage for a lesser price. And, in the middle of all the ambiguity, we frequently choose the wrong policy. The following article discusses the many types of life insurance plans and their advantages so that you can make an informed decision when obtaining a policy.
Types of Life Insurance Policies In India
The advantages and benefits of the five different types of life insurance plans available are listed below:
1. Plan for Your Entire Life
A whole life insurance policy covers you for your whole life. The insurer promises to pay the money covered to the policyholder's nominee if the premium is paid on time. Unlike conventional insurance plans, it doesn't have a predetermined term. The dependant receives the guaranteed amount when the policyholder passes away. In addition to the sum guaranteed upon your death, it also includes a savings component. You have the option of reinvesting it to increase the cash value or remitting a portion of the cash value during your lifetime. You may also use your funds as collateral for a loan.
2. Plans for Term Insurance
A term insurance policy is a plain life insurance policy with no riders. You pay an insurance company a premium for a specific number of years in exchange for the insurer pledging to repay your family for the sum guaranteed if you die early. Apart from the Term Plan with Return of Premium, it offers no maturity benefits (TROP). It provides more coverage for a lesser price when compared to other life insurance plans.
3. Insurance Plans with Units
A ULIP, or unit-linked insurance plan, is a kind of insurance that also functions as an investment. The insurance company appoints a fund manager to undertake debt and stock investments. Policyholders, on the other hand, have the option of deciding whether or not to invest in debt or equity, and in what proportion. The policyholder receives a lump sum payout at maturity, notwithstanding the fact that there are no guaranteed returns. The insurer will pay a sum promised if he or she dies during the policy's term. Despite the lack of a guarantee, ULIPs offer a greater return than regular plans with a savings component.
4. Plans for Endowment
Savings and protection are combined in endowment insurance. In the case of the policyholder's untimely death, insurers promise to pay the insured sum to the nominee if premiums are paid on time for a defined length of time. Meanwhile, if the policyholder survives the policy period, he or she will receive a lump-sum payment known as the maturity benefit. There is a saving component in addition to the sum promised. It can be used to save for a specific purpose and to borrow against in the event of an emergency.
5. Money-Back Guarantees
Moneyback insurance is a type of insurance that combines savings with protection. However, the major benefit of this insurance is that you will be paid a portion of the money promised at regular intervals throughout the policy time. At the conclusion of the term, the remaining amount, as well as the bonus, is payable. Other types of life insurance do not provide this benefit. Despite the fact that the policyholder has already received survival benefits if the policyholder dies within the policy term, the whole sum insured is paid to the nominee. Moneyback plans provide the most important advantage in terms of liquidity since you are paid a proportion of the sum insured on a regular basis.
If you're considering buying life insurance, think about what you'll use it for. After you've decided what you want to accomplish, evaluate all of the policies to discover which one will be the most beneficial to you. The three factors that should impact your choice to obtain a life insurance plan are the need for the coverage, the benefits you would receive from the policy, and your capacity to pay the premium.
Also read-Tax Benefits Of Purchasing A Term Plan
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.