Types of Life Insurance Policies and Riders

Updated On Jul 01, 2021

What Is A Life Insurance Policy?

Life insurance is an agreement between the policyholder and the insurance company that if the policyholder dies, the policyholder's specified beneficiary will receive a set amount. Life insurance protects a person's life by giving a sum of money to a designated beneficiary, who can then use the money to make their own life, which is why it's called life insurance. Nowadays, seeing how uncertain life can be, everyone is advised to have life insurances.

What Is A Rider?

A Rider is an add on plan or a supplement added to your base policy to enhance and widen its coverage and cover up amount. Riders are cost effective, optional and come with a lot of benefits without the management hassles. Here are some of the popular riders:

Return Of Premium Rider
Premium Waiver Rider
Accidental Death Rider
Spouse Rider
Children Rider
Family Income Benefit Rider

All these riders are added to the base policy to increase its coverage at low costs and with options to terminate as per the wish of the insured.

Different Types Of Life Insurance Policies

Here are the most popular and widely used life insurance policies:

Term Plan : A Risk Cover Plan

Term insurance covers the risk of death for a set length of time. The company pays the death benefit to the nominee if the insured dies during the policy period. It is a full risk insurance plan which aims to provide substantial coverage at a reasonable cost. There's also the option of adding riders to expand the coverage.

Unit Linked Insurance Plan (Insurance + Investment)

A unit linked policy is a holistic insurance and investment package. Part of the premium is allocated as a risk protection factor, while the rest is deposited in funds. The insurance firm subsequently invests the money in bonds, equities, liabilities, market funds, or alternative investments on the capital market.

Endowment Plan : Insurance + Savings

An endowment plan combines insurance and savings. A part of the amount is set aside for insurance, while the balance is invested by the life insurance company. If the life guaranteed sustains the term of the policy in an endowment plan, the insurance company pays him a maturity benefit.

Money Back : Insurance Cover with Frequent Returns

A money back plan is a type of life insurance in which the insured receives a percentage of the sum assured as a survival reward at regular periods. Theseare also eligible for bonuses that are announced from time to time. This helps you achieve your short-term financial objectives.

Whole Life Insurance : Lifelong Coverage

A whole life insurance protects the life assured for the rest of their lives, or up to the age of 100 in some situations. The sum assured or coverage, is determined at the time of policy acquisition and is paid to the beneficiary when the life assured dies, together with any incentives.

Child Plan : For Bright Future of Your Little One

Child plans assist in the collection of corpus for a child's education and marriage. After the age of 18, most Child Plans offer annual instalments or a one-time payoff. If in the terrible event that the covered parent passes away during the policy term, the insurance company is responsible for prepayment.

Retirement Plan : Helps To Plan For Non-Working Years

A retirement plan helps in accumulating funds for your retirement. assisting you in being financially self-sufficient and worry-free. After the age of 60, the majority of child plans offer annual instalments or a one-time payoff. In the terrible event that the life insured passes away within the policy term, the insurance company will make an immediate payment to the nominee.

Conclusion

Life Insurance is an obligatory investment everyone should make. It not only safeguards your life but also your loved ones’ life, in your absence. Choose the best plan for yourself and invest judiciously to stay carefree in adverse times.