Like in life which has many flavors even insurance companies offer different types of insurance plans under its scope, learning about the kinds of policies that are offered in the market. Even for the same amount of death benefit, the premium costs, structure of the policy, tenure, etc. will vary extremely depending on the type of the policy. Knowing about different kinds of policies will help one in making informed decisions all other kinds of insurance policies are usually built based on the combinations of these policies.
Types of Life Insurance Plans & Policy Features
Term Insurance is the purest form of insurance and is also the cheapest, term insurance policy typically covers the life of the person for a fixed term for example 20 or 30 years and in case of his/her death a fixed amount will be paid to the nominee based on the terms and conditions of the policy and in case if the policy holder out lives the term period of the term insurance policy no maturity value will be paid to the insured person.
Whole Life Insurance
Whole life insurance offers you a guaranteed lifelong protection and one can be assured that his family will be paid a fixed amount at the time of death of the policyholder. Whole life insurance plans are pricey when compared with term insurance plans as the insurance company will be liable to pay the fixed amount in future, these policies are ideal for those who want to create an estate for their heirs as an inheritance.
Endowment policies also known as investments/savings cum insurance plans offers you a fixed amount of money for risk coverage and the policy holder will be paid with an amount along with bonuses (if any) at the time of maturity and in case of unfortunate event sum assured along with accrued bonuses (if any) will be paid to the nominee.
Endowment policies are the most commonly sold insurance policies by the insurance companies in India, with savings factor attached to it the premiums for these policies will be higher.
Money Back Policy
Money Back Policy offers a certain percentage of the sum assured to the policyholder at regular intervals as defined in the policy as survival benefit and the balance amount of the sum assured along with bonus and loyalty addition will be paid at the time of maturity and in case of life risk the sum assured in full will be paid to the nominee.
Children policies are usually sold on the life of parent/children for the benefit of kid the maturity benefit is planned in a way to get funds at various stages of life of the children (most commonly to fund the college education of the children). In addition life insurers usually offer waiver of premiums for children policies in case of death of the parent/proposer of the policy.
Annuity plans are for those who are looking for regular fixed income every month and are commonly bought by the retired or old age people to take care of their rainy days. In other words annuity plans (also called as pension plans) are just like bank fixed deposits where as in these plans the pension/regular payment amount will be fixed at the time of start of the policy and one will not be affected with the fluctuations in interest rates.
Annuity plans don’t have any maturity value attached to it and in case of death of the policyholder the nominee will have the choice to continue the annuity plan or to withdraw the fixed amount.
Unit Linked Insurance Policy (ULIP)
Unit Linked Insurance Policies commonly known as ULIPs offers you the combination of savings/investment cum insurance just like endowment plans where as in ULIPs the policyholder will have the flexibility to choose the underlying assets for your investments ranging from bonds, fixed deposits, equity shares, etc. In ULIPs the risk of the investment will be borne by the policyholder as he/she will have the choice to choose the portfolio as per their own risk appetite. In ULIPs the maturity value depends on the performance of the fund one chooses and the amount equal to sum assured plus fund value as on date will be paid as death benefit in case of death of the policyholder.
To conclude these are most commonly available types of life insurance policies that are available in current markets, although I have done my homework well there could be chances that I might left few types of insurances in such case please let me know if have missed any. Also let us know what kind of insurance policy who currently have or planning to buy, my suggestion on what kind of insurance you have to choose is feed for another post.