6 Types of Life Insurance Plans and their Benefits
A life insurance policy is an agreement between the policyholder and the insurance company that assures a certain amount of money immediately upon death or savings for a while to offer it as financial coverage. Many insurance companies in the market offer some best 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, e.g. 10, 20 or 40 years. These years are popularly known as the ‘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 to help them 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 total 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 an opportunity to gain financial benefits over the maturity of the time period and the life cover.
3. Unit Linked Insurance Plan:
Unit Linked Insurance Plan is also a combination of insurance and investment. The insurance company offers various funds in which the policyholder can partly invest the premium. The funds are invested in bonds, debts, equities, or market funds. These plans are linked with market conditions and increases and decrease accordingly. There are various types of ULIP plans which qualifies for different investments.
An investor may buy one company's shares and get exposed to market forces on that one company. The investor can divest his portfolio in many sectors and many companies in each sector, called diversification. This would help the customer lower the risks of market forces. Even if some sectors are negatively affected in the market, the progress in other sectors will take care of the overall investment returns sought 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 allows for gaining financial benefits.
4. Money Back Policy
A money-back policy offers a policyholder an average tenure of 10-15 years. It is slightly different from the rest policies in the market as it provides a percentage of the sum assured back to the policyholder that is allotted proportionately over the period of time as survival benefits.
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 plan comes with an option to withdraw the insured sum partially. The policyholder can again 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 dependents. But whole life policy can be one 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 given to the policyholder as a monthly income by way of an annuity or lump sum depending on the insured's instruction. Pension plans have a great feature called Joint Life Last-survivor where the policyholder 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.
*Until the age of 99 or even 100 years
Also Read,
Best Life Insurance Policy in India 2023