Life insurance policy is a contract between the insurance company and policyholder, where the insurance company ensures to pay a sum of money in exchange for a premium paid at regular intervals after the death of an insured person to beneficiaries. In other words, providing financial security to the policyholder’s dependents after their death is the main aim of the life insurance policy.
Moreover, the death benefits endowed by beneficiaries after the insured person’s death replace the income earned by him. Therefore, if someone is looking for financial security for their loved ones in the future after their demise, we will discuss the types of life insurance you can buy to secure the future of your loved ones.
Types of Life Insurance Policy in India
1. Term Life Insurance
It is a simple life cover in which a policyholder pays a premium to an insurance company, and if they meet with an unfortunate demise, the insurer pays a sum assured to the beneficiary. Additionally, it provides higher coverage for a lesser premium than other life insurance policy covers.
Moreover, it does not come with any maturity benefits, but certain plans like term plans with a return of premium(TROP) offer maturity benefits. Therefore if someone is looking for an affordable policy, term life insurance would be a great choice for you.
2. Whole Life Insurance
The insurance policy offers coverage right after the death of policyholders with a saving component that one can reinvest and let the cash amount grow. Also, one can opt for participating or non-participating policies according to their financial need.
Though the premiums paid in participating insurance are higher, the dividends are paid regularly to policyholders. Whereas in non-participating insurance, the premium paid is lower, but policyholders cannot avail of the benefits of the dividends.
3. United Linked Insurance Plan(ULIP)
It is a type of insurance that offers benefits of both insurance and investment. Due to its versatile nature, ULIP gained a lot of popularity. As in ULIPs, a portion of the premium paid is directed toward insurance coverage, while the rest is invested in several fund instruments.
So, if someone is seeking a long-term investment with a life cover for the financial security of their loved ones, they can opt for various ULIP plans according to their risk appetite.
4. Endowment Policy
This policy is a combination of savings and protection. If the premiums must remain consistent for a specific period, the insurer promises to pay the assured sum to the beneficiary, ultimately after the policyholder’s death. Meanwhile, the policyholder will also get the maturity benefits if the policy matures before his death.
Moreover, an endowment policy is broadly classified into two plans: with profit and without profit, and the policyholder can choose from these two according to their risk appetite.
5. Money Back Policy
It is one of the best types of life insurance policy that offers policyholders a percentage of the sum assured at regular intervals as survival benefits. And after the policy gets mature, the remaining amount of the sum assured will be given to the insured person.
However, in case of the unfortunate demise of a policyholder, the whole amount will be given to the beneficiary without any deduction.
6. Retirement Plan
This type of insurance plan provides security and financial stability after retirement, as this plan will help with the expenses afterward if the insured person invests until retirement. It just requires investing a part of their income during their working life, and after retirement, this investment will convert into a regular income source to meet their expenses.
7. Child Life Insurance
It is a savings cum investment plan to meet the future financial needs of one’s child. By investing in child life insurance, one can allow their children to live their dream and make savings for their education. Therefore, if someone wants to make their children financially secure for the future, this plan is the best choice.
8. Group Life Insurance
As its name suggests, this insurance policy covers a group of people, such as employees of an organization or members of a professional association, all under one contract or insurance policy. Also, note that a minimum of 10 members must invest in group life insurance.
Conclusion
Life insurance in India can be an important financial planning tool. There are a variety of different policy types available to suit individual needs. From term insurance plans that offer basic protection and coverage for a set period of time, to endowment policies that provide long-term savings with death benefits, each type has its own advantages and disadvantages. It is important to weigh the options carefully when selecting the right policy for you as the right fit can help you protect your family’s future. Ultimately, investing in life insurance is an effective way to ensure financial security even after you’re gone.
