Types of Life Insurance Policies in India
Updated On Jun 18, 2021
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A life insurance policy is a way of ensuring the financial security of your loved ones in an unfortunate event. Hence, it is essential to select the right life insurance plan by carefully assessing personal and family needs and comparing different policies to enhance the safety net.
The first requirement can be fulfilled through consultations with insurance agents and financial advisors to estimate sufficient life cover and affordable additional benefits. For the second requirement, read on to learn about different life insurance policies to help make comparisons and, consequently, choose the right plan.
Types of Life Insurance Policies Offered in India
There are mainly 9 kinds of life insurance policies that are offered in India.
1. Term Insurance Policy
This is the most sought after policy plan offered in India because of its affordability. Under this, the beneficiary receives the death benefit if the life assured passes away within the term-end. The policy also has the provision of providing monthly income as income replacement to the beneficiary. However, unlike other plans, a term insurance policy is for a specific duration and does not provide maturity benefits. The policy can be further classified into 3 plans:
- Level Term Life Insurance - Under this, the death benefit throughout the policy term and premium amount after renewal remain the same.
- Decreasing Term Life Insurance - Under this, the death benefit decreases with time; however, the premium remains constant after renewal as well.
- Increasing Term Life - Under this, the life cover and the premium amount increases with time.
2. Whole Life Insurance Policy
A whole life insurance policy offers life coverage for the entire life of the life assured, even if he lives up to 100 years. Moreover, the policy's cash value component keeps increasing with the time that can be withdrawn anytime, even to avail a loan sometimes. However, a reduced death benefit will be paid if the life assured passes away before the loan repayment.
2. Unit-Linked Insurance Policy
ULIP offers dual benefits of life cover protection and investment opportunities under a single policy plan. Under this plan, the insurer keeps a certain amount of the paid premium as coverage and invests the remaining portion in debt, or equity or both, whatever resonates with your long-term family and financial goals like children’s education, retirement planning etc.
3. Endowment Policy
The life assured with the endowment policy plan enjoys a twofold advantage of a life cover and savings. According to this plan, the life assured or beneficiary is provided with the maturity benefit after the policy term-end. However, if the life assured dies, the beneficiary will be paid the sum assured along with some bonus calculated through the number of years the life assured lived within the policy duration.
4. Money Back Life Insurance Policy
Under this plan, the policyholder is provided with a percentage of sum assured at uniform intervals within the policy term-end. The life assured will get the remaining amount from the aggregate and the accumulated bonus on the plan's maturity if he survives after the term-end. However, if the policyholder passes away within the policy duration, the beneficiary will be paid the entire sum assured, disregarding the previously paid installments. As the plan provides returns within the policy duration, it is one of the most expensive policy plans.
5. Retirement Plan
This plan offers regular pension benefits during the vesting period, which helps achieve financial stability and gives a provision of income generation even after the policyholder's retirement. If the life assured dies within the policy term, the nominee would be provided with the death benefit.
6. Child Insurance Plans
This savings-cum-investment plan secures your children's future by providing financial assistance for their education, professional and personal goals. The plan can be purchased when the child is born, and the savings can be withdrawn once the child reaches adulthood. There are some provisions with help in making intermediate withdrawals during special occasions.
The right insurance plan should be purchased according to your personal and professional needs and your family’s lifestyle and future goals. Hence, it is advisable to compare all the policies carefully before investing.
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.