Types of life insurance and their benefits
Life insurance policy is the agreement between the policyholder and the insurance company that assures a certain amount of money immediately upon death or also in form of savings for a period of time to offer it as financial coverage. There are a lot of insurance companies in the market that offers some great insurance plans with a low premium and maximum benefits. Let us have a look at the type of life insurance policies and the benefits they offer.
1. Term insurance plan
The most commonly purchased of all, term insurance policy is fixed for a specific duration. For eg. 10, 20 or 40 years. These years are popularly known as ‘term’ of the plan. It provides a death risk cover and is best known for higher sum assurance at lower premiums. The plan also comes up with an option to widen up the coverage. Some insurance companies offer term plans with premium returns, where the companies return all the paid premium amount once the policyholder outlives the assured term period.
Benefits: the term insurance plan benefits the family of the policyholder in case of untimely death. The family gets an enormous amount of sum assured that can help them to pay for the child’s education, loan, monthly expenses, etc.
2. Endowment policy
Endowment policy plans are a combination of insurance and savings plans. In case, when the policyholder survives after the maturity period of the policy, he/she gets the full sum assured. Not only this, but any endowment plan also ensures that the policyholder should get some amount throughout the policy period. The plan is best known for its long term saving option and bonuses.
Benefits: This plan gives the opportunity to gain financial benefits over the maturity of the time period along with the life cover.
3. Unit Linked Insurance Plan
Unit Linked Insurance Plan is also a combination of insurance and investment. The insurance company offers different funds in which the policyholder can partly invest the premium. The funds are invested in bonds, debts, equities or market funds. These plan are linked with market conditions and increases and decreases accordingly. There are various types of ULIP plans which qualifies different investments.
Investor may buy the shares of one company and get exposed to market forces on that one company or the investor can divest his portfolio in many sectors and many companies in each sector, called diversification. This would help the customer in lowering the risks of market forces as even if some sectors are negatively affected in the market, the progress in other sectors would take care of the overall investment returns sought for in the long term.
Benefits: Along with the life cover, ULIP also offers you to invest in bonds, equities, or market funds as per your risk appetite. This also gives the opportunity to gain financial benefits.
4. Money Back Policy
A money back policy offers a policyholder an
Benefits: It also provides an opportunity to earn on maturity.
5. Whole Life Policy
As the name suggests, the whole life policy provides life-covers until the person is alive*. It also gives survival benefits to the policyholders. This comes with an option to partially withdraw the insured sum. The policyholder can also borrow sum against the policy.
Benefits: With the promise of lifelong protection, the policy also provides the opportunity to leave behind for heirs. Life is uncertain and traditionally people consider property as the only thing to save for the the dependents. But whole life policy can be one of the way of safeguarding your dependant’s future by planning a corpus for legacy policy for them.
6. Annuity/ Pension Plan
This policy plan provides life-cover and financial security after retirement. The premium is accumulated as assets and is given to the policyholder as a monthly income by way of an annuity or lump sum depending on the instruction of insured. Pension plans have a great feature called Joint Life Last survior where the policy holder gets a defined amount of pension, the same amount is given to his spouse and a corpus is given to the dependants after the spouse's death
Benefits: The policy helps to build a corpus after retirement and provides financial independence.
*untill the age of 99 or even 100 years