Life Insurance can be defined as a contract between an insurance policy holder and an insurance company, where the insurer promises to pay a sum of money in exchange for a premium, upon the death of an insured person or after a set period.
Types of life Insurance
1. Term Life Insurance Plans
- It is a pure risk cover policy that offers only death benefit and no maturity benefit.
- This type of life insurance gives you maximum coverage with minimum premium.
- The objective of term plans to offer financial protection to the nominees in the event of the policyholder’s unfortunate death.
2. Endowment Plans
- An endowment plan = insurance cover + savings
- The plan offers both death benefit as well as maturity benefit i.e., sum assured is paid to the nominee or family in case of death or sum assured amount plus accumulated bonus in case the insured outlives the policy term.
3. Whole Life Insurance Plans
- Whole life insurance plans also known as traditional plans cover the life insured up to 100 years of age.
- It offers both death benefit as well as maturity benefit.
4. Money Back Plans
- As the term suggests, the policy offers the sum assured money back at regular intervals, during the policy term.
- The balance of the sum assured is paid as lump sum including accrued bonuses on maturity.
- In case of the unfortunate death of life insured, the death benefit is paid to the nominee.
5. Unit linked insurance plans (ULIPs)
- ULIPs = insurance + investment + tax-saving tool i.e., Triple Advantage in one plan!
- One part of the premium paid is used to offer life cover and remaining premium is invested into various schemes such as Equity and Debt.
- Moreover, you can choose the funds to invest depending upon your risk appetite and investment horizon.
- You can use a ULIP calculatorto calculate the returns based on the amount, tenure, and frequency of investment.
6. Child Plans
- A child insurance plangives life cover + either one time pay-out or pay-outs at regular intervals to fulfil financial requirements for important events in a child’s life, for instance, higher education, overseas studies, marriage, etc.
- In case the parent passes away during the policy term, payment is made to the child or family.
- Many insurance companies waive off the premiums in case of death of the policyholder (usually the parent) and make the payment (to the child) after maturity period.
7. Retirement Plans
- Retirement plans also known as pension plans offer lump-sum or monthly income in the form of pay-outs for a financially independent and worry-free retirement life.
- You can opt for annual payments or a single pay-out after the age of 60 years.
- In case of the death of the insured, payment is made to the nominee either based on coverage, fund value or 105% of premiums paid.