Term Insurance

Are All Life Insurance Policies the Same?

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Sanjeev, a 35-year-old professional, was filling his daughter’s school admission form. School fees, tuition classes, etc., for his daughter, would now form the majority of his expenses. Over the years, the school fees would multiply. He would require more resources to meet those expenses. Higher studies will be even more expensive. And if she studies abroad, or chooses to start a business – he was afraid to even finish that thought. And if something happens to him who will take care of his family?

While he and his wife were financially well-placed currently, he knew the rising costs could severely dent the family’s aspirations. Sanjeev decided to make the most of his current situation, by investing in a life insurance policy that would offer increasing pay-outs to match his rising expenses at different stages of his life on one side and give him a life cover on the other side so that his family will not suffer in his absence. But he was unsure where to invest as there are different types of life insurance policies available and he has very little information about them. For this, he decided to search online to know about various life insurance policies. What he came across while searching on the internet is given below:

Life insurance can be categorized as a pure risk coverage plan purely insurance and the other, which is a combination of insurance and investment component. But, possibly you are not sure which plan to choose. Or maybe you need to know the different types of life insurance policies available in the market to make a prudent choice!

Different Types of Life Insurance Policies in India

  1. Term Life Insurance

The simplest form of life insurance plan is Term insurance which is easy to understand and affordable to buy. Just in case the life assured die during the policy period, the life insurance company pays the death benefit to the nominee. It is a pure risk cover plan that offers high coverage at low premiums. There is also an option which covers your wife after your demise. There’s also an option to add riders to widen up the coverage. The death benefit is payable as a lump sum, monthly payouts, or a combination of both.

  1. Unit Linked Plans (ULIPs)

A unit linked plan is a combination of insurance and investment. The premium paid towards ULIP is partially used as a risk cover (insurance) and part is invested in funds. Depending on his risk appetite one can invest in different funds offered by the insurance company. The insurance company then invests the accumulated amount in the capital market i.e. in bonds, equities, debts, market funds, or hybrid funds.

  1. Endowment Plans

Endowment plan is a combination of insurance and saving. A certain amount is kept for life cover insurance, while the rest is invested by the life insurance company. If the life assured outlives the policy term, in an endowment plan the insurance company offers him the maturity benefit. Besides, endowment plans may offer bonuses intermittently, which are paid either on maturity or to the nominee under death claim. On death, the death benefit is payable to the nominee.

  1. Whole Life Insurance

It covers the life assured for whole life, or in some cases, up to the age of 100 years. The sum assured or the coverage is decided at the time of policy purchase and is paid to the nominee at the time of death claim of the life assured along with bonuses if any. However, if the life assured live longer than the age of 100 years, the insurance company pays the matured endowment coverage to the life insured. Whole life insurance plans also offer part withdrawals after completion of the premium payment term.

  1. Retirement Plan

Retirement plan helps to build a sound corpus for your retirement helping you to live financially independent and without worries. In the event of an unfortunate event, the life assured passes away during the policy term – immediate payment is payable to the nominee by the insurance company. Conferring Benefit will be payable if the life assured survives the maturity age.

This is just a beginner’s guide to different types of life insurance policies.

After understanding everything about different types of life insurance policies Sanjeev decided to invest in a term plan, Ulip and in an endowment plan to secure his wife and daughter from the uncertainties of life when he is not around.

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