Types of Life Insurance
Updated On Apr 26, 2021
Today an individual has a range of choices for financial planning to choose from. Most people concentrate on the factor of wealth creation and compromise with the protection element. With increasing inflation, changes in lifestyle choices and the transition to nuclear families, the first stage of financial preparation should be life insurance. Insuring your life for the financial safety of your dependents should be paramount before proceeding to address any other aspects.
Do Read: What is Life Insurance?
Types of Life Insurance
Choosing the best life insurance from different types of life insurance is a crucial financial decision, as it allows you to shield your loved ones from the uncertainties of life. However, you may not be completely aware of the types of life insurance plans in India and the impact on your financial wellbeing.
Given below are some of the different types of life insurance plans available to policy buyers
1. Term Life Insurance
Term life insurance provides the beneficiary with a death benefit if the insured/policyholder dies during a certain/specified period of time. If the policyholder lives till the expiration of the contract or term, no pay-out or death claim can be made. This type of life insurance is quite affordable when compared to other life insurances.
2. Whole Life Insurance
This insurance plan provides coverage throughout your lifetime as long as the policy is in force. Whole life insurance policies also comprise a cash value component that increases over time. You can withdraw your cash value or take a loan against it as per your needs and convenience. In case of your unfortunate death before you pay back the loan, the death benefit received by your beneficiaries will be proportionately reduced to the extent of the loan amount.
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3. Endowment Policy
In this type of life insurance policy the sum assured is payable to the insured if he/she is still living on the policy's maturity date, or to a beneficiary if the insured dies. Endowment plans offer you a dual combination of savings and protection. If the insured dies during the insurance policy term, the beneficiary/nominee receives the sum assured including the bonus or participating profit or guaranteed additions if any. The profit/bonus is paid for the years that the policyholder/insured survives in the policy term.
4. Money Back Policy
It gives you money over the tenure of the policy. If you live beyond the insurance contract term, at the completion of the policy term, you will still receive the balance portion of the corpus and the accumulated bonus. However, in the case of an adverse event before the complete term of the insurance contract has ended, the beneficiaries are eligible to receive the full value of the insured premium, irrespective of the number of installments paid.
5. Savings, Investment, and Retirement Plans
Savings and investment plans provide you an assured sum for future expenses for you and your family. They provide an excellent savings tool for your long-term and short-term financial goals. Retirement plans help to build a ‘retirement corpus”. On maturity, this corpus is invested for generating a regular income stream known as annuity/pension
Life insurance is not just to meet the daily expenses of the family in the absence of a breadwinner. During the financial crisis, it should be capable enough to bail out your family. Therefore, you must always choose one or two best types of life insurance that can support your family in different life stages.
Also Read: How Much Life Insurance Do I Need?