Types of Life Insurance Policies in India and Why Everyone should take one

Following are the types of life insurance available in India:

  • Term insurance
  • Term insurance with return of premium
  • Unit Linked Insurance Plans
  • Endowment plans
  • Moneyback policy
  • Whole life insurance
  • Group life insurance
  • Child Insurance Plans
  • Retirement Plans

Family, Health, Heart, Human, Group, Personal

 

 Term Insurance Plan

Term insurance is the most basic form of life coverage. It is affordable life insurance that one can buy easily, without any hassles. This is one of the types of life insurance policy in India that you can buy for a specific period of 10, 20, 30, or more years, hence the name. Simply put, a term insurance plan offers death cover for a stipulated time period. God forbid, in the event of the sudden demise of the insured during the policy tenure, the life insurance provider offers a pre-decided death benefit as a lump sum, as a monthly/ annual pay-out, or as combined benefits to the nominee. The best term plan offers comprehensive coverage at a competitive premium.

While some other types of life insurance policy offer maturity benefits, term insurance does not. It is one reason why term insurance, being the best insurance policy in India, is comparatively cheaper than other types of life insurance schemes.

 

Term Insurance with Return of Premium

A term insurance plan is one of the types of life insurance policy that provides a death benefit but no maturity benefit.

If you live a healthy lifestyle, the probability that you will outlive the best insurance policy in India you have bought also increases. For you, term insurance with return of premium is one of the best insurance policy in India, which also give you maturity benefits.

It is one of the types of term insurance plans that give back the premiums you pay on surviving the policy period.

Unit Linked Insurance Plans

A unit-linked insurance plan or ULIP is a type of life coverage plan that offers a perfect blend of insurance & investment. It comes with a long-term investment opportunity along with valuable investment flexibility. The premium paid towards a ULIP is partly used as a risk-cover for life coverage plan and the remainder is invested in market funds such as debts, equities, bonds, market funds, hybrid funds etc. The selection of the market funds depends purely on the risk appetite of the life insurance buyer. Based on that, the insurer invests the amount in the capital market as per the insured’s preference.

 Endowment Policy

Endowment policies are one of the types of life insurance policies that provide you with the combined benefit of life insurance and savings. Along with giving you the life cover, these types of life insurance help you save money regularly over a period to get a lump sum at maturity.

What makes them one of the most useful types of life insurance policies is that they help fulfill long-term goals in life. You will also get the maturity amount if you survive the policy tenure.

Endowment policies, being one of the most appropriate types of life insurance plans, also help you create a financial cushion for your family to meet various financial objectives in life.

 

Money Back Plans

True to its name, this type of life coverage plan offers a stipulated percentage of the assured sum. It is paid back to the policyholder at pre-decided intervals. This payback benefit is known as a survival benefit. Money back Policy is the best type of life insurance policy for individuals who want their investments to be accompanied by an element of liquidity. Furthermore, these plans are eligible for bonuses as declared by the provider (if any).

 

Whole Life Insurance

As a life insurance policyholder, you get the benefits depending on the types of life insurance plans. What distinguishes a whole life insurance plan from other types of life insurance is that it provides insurance coverage to the insured for the entire life, up to 100 years of age.

The death benefit is payable to the beneficiary in the case of the untimely demise of the policyholder. On the other hand, you are eligible to receive a maturity benefit under a whole life insurance policy if you cross 100 years of age.

Another significant feature of these types of life insurance plans is that some plans offer the option to pay a premium for the first 10-15 years while you get the benefits for the entire life.

 

Whole Life ULIP

A variant of whole life insurance is available in the market that clubs the benefits of life insurance plans with ULIPs. A whole life ULIP offers extensive coverage along with high returns. Please Note- In case the policyholder outlives 100 years of age, the life insurance provider pays the benefit of matured endowment coverage to the policyholder.

Group Life Insurance

Just like group health insurance, group life insurance is one of the types of life insurance that covers a group of people under one master policy. These types of life insurance are generally provided as part of an employment benefit.

A unique feature of these types of life insurance products is that you will get the insurance cover if you remain a part of the group. It is different from the individual types of life insurance plans in which the coverage continues throughout the chosen policy tenure.

Child Plans

A child plan acts as a tool to generate funds for the policyholder’s child. A child plan helps one build a corpus for their child that can be used for the child’s education and wedding. Generally, child plans either provide benefits as installments on an annual basis or a 1-time payout once the insured child is 18 years of age. In an unfortunate event of the untimely demise of the policyholder during the policy term, immediate premium payment is payable by the insurer. In such cases, some life insurance providers waive off future premiums but the plan continues till the opted policy term.

 

Retirement Plans

Retirement Plans are insurance plans which provides financial security and help you with wealth creation after your retirement. With Retirement Plan, you will get a sum of money as pension in the vesting period. In case of your untimely demise during the policy term, your nominee will get the death benefits. Retirement Plans comes with death benefit as well as vesting benefit providing protection to you and your family members.

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Provides for Loss of Income 

In case of the policy holder’s death, the dependents will suddenly be left without a constant source of income. The future requirements of the dependent members too would be hugely compromised with them having to settle for options that are not as good as you would have wanted if you were around. With a good amount of life insurance cover you can ensure that your family is not left high and dry along with the emotional trauma of your absence. It is one of the most important reasons for taking a life insurance policy.

Financial Planning

Life insurance policies can also be taken for sound financial planning depending on your requirements and risk appetite. For conservative investors, there are a host of traditional policies like money-back insurance policies and endowment plans to provide income to you at regular intervals of time. The more market-friendly investors can choose ULIPs (Unit Linked Insurance Plans) to plan their future. There is a higher element of risk involved with ULIPs but the gains too can potentially be on the higher side. Ideally, each individual should assess their requirements and choose their investment options and time horizon.

Protects your Assets

In your absence, your family should not have to resort to selling the assets which you accumulated with your hard work. In the event that there is no source of income your family would have to sell assets like land, home, vehicle, jewelry which you had so lovingly purchased. The comforts you wanted to provide to your family should not be taken away from them to make do for their day-to-day living. In case you are adequately ensured, all your loans and your family’s financial future would be well taken care of.

Tax Savings

One of the key reasons, people buy life insurance is to avail tax benefits under section 80C up to the limit of Rs. 1,00,000 annually. Money paid as a premium of Life Insurance policies is exempted from income tax and the proceeds from a life insurance policy on maturity also get tax exemption under section 10(10D) of the income tax.

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