Life insurance is one of the most popular savings/investment vehicles in India. Apart from protection against premature death, an insurance policy offers much more like tax planning & investment returns. It offers a person the ability to plan for unforeseen events that could affect the family’s financial profile adversely. Life insurance policy ensures, that if a person suffers untimely death, the beneficiary will have the financial resource in place to protect their future income & pay for immediate and future financial obligations.
Life insurance is a unique investment that helps a person meet the dual needs of saving for life’s important goals, and protecting the assets. The unique benefits of life insurance are as follows:
- Protection to family
- Child's education
- Asset Protection
- Retirement planning
- Protection against rising health expenses
- Tax benefits
- Safe & profitable long-term investment
Different types of life insurance policy have
different set of goals and objective which have a broad scope. Thus, before you
decide to buy a Life insurance plan its very important to understand what are
the different types of Life insurance products available in the market. So,
here are the list of Life insurance plans broadly available in the Indian
market:
Term Life plan:
Term life plan are the purest form of life insurance,
as they do not offer any survival benefits, just death benefit. It is also the
cheapest form of life insurance. In case of untimely death, dependents will
receive the benefit amount specified in the insurance agreement. Term life plan
can be customized with addition of riders, such as accidental death benefit,
critical illness etc.
For example, a 25-year-old man takes a term life plan
of sum assured Rs. 1 crore, till he turns 60 years of age. The premium amount
for this type of cover might range from 7,000/- to 10,000/- depending upon
different condition. Also, he wants to have an accidental death benefit rider
of sum assured 30 lakhs, which premium comes out to be anywhere between 2,000/-
to 4,000/-. So, for a 1 crore term life plan with a rider of Rs 30 lakhs, this 25-year
guy have to pay a premium between 9,000/- to 14,000/-.
Whole Life Policy:
Whole life policy provides death benefits for as long
as one lives. With this type of whole life insurance policy, premium rates
never change. It is important to note that whole life policy premiums can be
much higher than term life plan premiums, but they are smaller than the
premiums one would pay for renewing term life plans in later years.
Pure Endowment Plan:
A pure endowment plan is a form of life insurance
policy in which the insurer commits to pay the policyholder the sum guaranteed
if they live to the end of the policy term. The money is paid in a single
payment as a lump sum at the policy's maturity. This means that you can count
on receiving returns if you invest in a pure endowment insurance.
Endowment Plan:
In case of endowment plan, the term of the policy is
defined for a specified period say 15, 20, 25 or 30 years. The insurance
company pays the claim to the family of assured in an event of his death within
the policy term or in an event of the assured surviving the policy term. They
assist the policyholder in developing a saving habit while also providing
financial stability for their family. There are two sorts of endowment plans: with
profit and without profit. Based on their risk appetite, policyholders can pick
between these two categories.
Term with return of Premium:
Term with return of premium is a form of life
insurance policy that either returns or includes a portion of the premiums paid
to the beneficiary upon the insured's death if the covered person survives the
policy's term. The maturity benefit available on a term plan with return of
premium is the fundamental feature that distinguishes it. By paying an extra
premium, policyholders might benefit from a term plan with premium return.
You can select the needed sum assured and policy
duration, as well as pay the premiums. When the policy matures, the insurance
company will reimburse the customer for the premiums paid. For example, a 1
crore policy bought for 10,000/- a year over a 30-year period would result in 3,00,000/-
being refunded to the surviving policyholder at the end of the 30 years.
Unit Linked Insurance Plan:
Unit linked insurance plans offer life insurance as
well as investment benefits. Part of premium paid goes towards the risk cover
and the balance is invested in debt or equity, or a combination of two. Because
investors may readily switch or redirect their premiums across the many funds
available, ULIPs are exceptionally versatile securities. ULIPs are also
promoted as having a tax-saving advantage over other market products, as their
proceeds are excluded from LTCG (Long Term Capital Gains).
Moneyback Policy:
Moneyback policy are a pert of endowment policies.
These are opted by people who want periodical payments. A moneyback policy is
generally issued for a particular period, and the sum assured is paid through
periodical payments to the insured, spread over this time period. In case of
death of the insured within the term of the policy, full sum assured along with
bonus accruing on it is payable by the insurance company to the nominee of the
deceased. This plan helps to accumulate a specific sum of money over a period
of time.
Retirement Plans:
A retirement plan is a sort of life insurance that is
designed to ensure financial stability and security once you retire. When you
retire, you no longer have a regular source of income. Investing in retirement
plans might help you establish a steady source of income. If you continue to invest
until you retire, the plan will assist you in meeting your post-retirement
expenditures. Retirement plans provide you with the chance for higher returns.
This is accomplished by investing a combination of equity and debt.
Furthermore, subject to Section 10(10D) of the Income Tax Act of 1961, the
money you receive at maturity is tax-free. You can also transfer cash between
retirement accounts tax-free.
So, these were some of the different types of life
insurance policy, now that you have a better understanding of the different
types of life insurance plans, you can make a more educated decision about
which plan is best for you and your family.