Exploring The Different Types Of Life Insurance Policies

A contract between the insured and the insurance company is all that life insurance is. The policyholder pays premium to the insurance company in exchange for the insurer promising to pay a sum promised to the nominee in the event of the policyholder's death. If the insured lives to the end of the term, the insurer may pay a maturity benefit. These terms and conditions, however, vary depending on the policy.

We had heard about the necessity of obtaining life insurance and had considered purchasing one at some point. The issue is that there are just too many different types of life insurance policies in the market. Your acquaintance may have told you about the endowment policy's maturity benefits, but you later read that a term plan gives more coverage for a lower price. And, in the midst of all the uncertainty, we frequently end up with the incorrect policy. The following article explains different types of life insurance policies and their benefits so that you can make an informed decision when purchasing a life insurance policy.

What are the Various Types of Life Insurance Policies Available in India?

Here are the advantages and benefits of the five various types of life insurance policies available.

• Whole Life Insurance Plan

A whole life insurance policy provides coverage for the rest of your life. If the premium is paid on time, the insurer guarantees to pay the sum insured to the policyholder's nominee following the policyholder's death. It does not have a set term, unlike other insurance policies. When the policyholder dies, the dependent receives the sum promised. It features a saving component in addition to the amount guaranteed upon your death. You can either reinvest it to grow the cash value or remit a portion of the cash value over your lifetime. You can also take out a loan against your savings.

• Term Insurance Plans

A term insurance policy is a pure life insurance policy with a straightforward structure. You pay a premium to an insurance company for a set number of years in exchange for the insurer promising to reimburse your family the sum assured if you die prematurely. It doesn't come with any advantages for maturity apart from Term Plan with Return of Premium (TROP). In comparison to other life insurance plans, it gives more coverage for a lower price.

Must read: How To Pick A Right Life Insurance Policy For Yourself?    

• Unit-Linked Insurance Plans 

A unit-linked insurance plan, or ULIP, is a type of insurance that also serves as an investment. A fund manager assigned by the insurance provider makes investments in debt and shares. Policyholders, on the other hand, can choose whether to invest in debt or equity and in what proportion. Although there are no guaranteed returns, the policyholder receives a lump sum payment at maturity. If he/she dies during the policy's term, the insurer will pay a sum assured. ULIPs provide a better return than standard policies with a savings component, notwithstanding the lack of a guarantee.

• Endowment Plans 

Endowment policies combine savings and protection. If premiums are paid on time for a set period of time, insurers offer to pay the insured sum to the nominee in the event of the policyholder's untimely death. Meanwhile, the policyholder receives a lump sum payoff called the maturity benefit if he or she survives the policy period. In addition to the sum assured, there is a saving component. You can use it to save for a specific purpose and borrow against it in the event of a financial emergency.

• Money Back Plans 

Moneyback insurance is a hybrid of savings and protection. The main advantage of this policy, however, is that you will be paid a portion of the money assured at regular intervals during the policy period. The remaining balance, as well as the bonus, is due at the end of the term. This benefit isn't accessible with any other type of life insurance. If the policyholder dies during the policy term, the entire sum assured is paid to the nominee, despite the fact that the policyholder has already earned survival benefits. The most significant benefit of moneyback plans is the liquidity they give, as you are paid a percentage of the sum assured on a regular basis.

Endnotes

If you're thinking about purchasing life insurance, consider what you'll use it for. And after you know what you want to achieve, assess all of the policies to see which one will benefit you the most. The need for the policy, the benefits you would receive from the policy, and your ability to pay the premium should be the three variables that should influence your decision to purchase a life insurance plan. 

Also read: How Much Life Insurance Cover Should You Have?

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.