7 Types of Life Insurance Policy in India

Life insurance is an essential tool to protect us from any future mishappenings.

When we think to buy a life insurance policy, we counter various terms like endowment, ulip, money back, etc. These terms confuse us that lead to wrong product selection.

In this article, we will talk about – what is life insurance and the types of life insurance policy.

What is Life Insurance Policy?

Life insurance is a contract between you and your insurance company. The life insurance company pays a lump sum amount to your beneficiaries after your untimely death, if you have paid your policy premium on time.

Types of Life Insurance Policy

  1. Term Insurance
  2. Endowment Plan
  3. Whole Life Insurance Plans
  4. Retirement Life Insurance Policy
  5. Child Life Insurance Policy
  6. ULIP
  7. Moneyback Life Insurance


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Term Insurance

You may call it a Term Insurance Plan. Term Insurance is the type of life insurance in which insurers provide death benefits to the beneficiary of the policyholder if the policyholder dies during the active policy.

In term insurance plans, No amount is given to the beneficiary of the policyholder on maturity. Term Insurance, as its name suggest can be taken for 10, 20, 30 years, and so on.

When you buy term life insurance at an early age, you will be eligible for a lesser premium in comparison to an elder man.

Term Insurance premium is significantly low as compared to other types of life insurance policy that’s why it is very popular in India.

Endowment Insurance

You may say it – endowment policy. Endowment life insurance policies are a combination of investment and insurance.

If you can’t stomach the risk and want to get guaranteed returns on your investment, along with insurance, then these plans are the best fit for you.

In an endowment life insurance plan, a lump sum amount (including bonus) is paid to the policyholder on the maturity of the policy if the policyholder survives the term, or death benefits are provided to the nominee of the insured if he/she dies during the policy.

In an endowment life insurance policy, you can pay your premium on a monthly, quarterly, or yearly basis.

Whole Life Insurance

As you read in term life insurance policy, you can choose term insurance only for a specific time but the whole life insurance policy covers you for your entire life, up to 100 years of age.

In a whole life insurance best policy, If you survive the policy term, you receive maturity benefits. On the other hand, death benefits are provided to your beneficiaries in case of your untimely death.

These benefits can vary from insurer to insurer.

You can pay your premium for a specific time or the whole of your life but it depends upon the term and condition of life insurance.

A loan facility is also provided in whole life insurance.

Retirement Plans

This insurance policy may be called retirement life insurance or retirement plan. If you want to build massive wealth for your post-retirement days and insurance cover during this period then you should go for these plans.

In retirement life insurance plans, you get a pension after your retirement days, as a replacement for your regular income. This pension can be taken on a monthly, quarterly, or yearly basis.

If you die during the policy tenure, your nominee will get death benefits. These benefits can be calculated by a simple retirement plans calculator.

Child Insurance Plan

You can call it child insurance. As a conscious parent, if you think about the future needs of your child and want to secure his/her future then you should choose a child insurance policy.

A child life insurance plan helps you to build a good amount of money for your child’s future needs like education, marriage, and other expenses.

You can start a best child insurance plan from the birth of your child and can withdraw maturity benefits after your child turns 18.

Parents can pay their premium with the flexibility of monthly, half-yearly, annually, or a single installment. If a parent dies during the policy term, the insurer pays an instant payment to cover child expenses.

ULIP Plan

ULIP’s full form is “Unit Linked Insurance Plans.” These insurance policies are called ulip plans. If you want to invest your money in market-linked schemes with an insurance cover, then a ULIP will be a great pick for you.

ULIP insurance comes with a combination of both investment and insurance. In ULIP policy, you can invest your funds in market-linked schemes such as equity, debt, bonds, hybrid funds, etc depending upon your risk appetite.

In ulip, you can decide where your money will be invested. If you can take risks, then equity and hybrid funds are for yours and if you can’t take risks then you should choose debt and bonds.

Returns on your investment will depend on market-linked instruments so the selection of schemes is very important.

Moneyback Policies

This policy can be said to be a moneyback policy/moneyback insurance policy.

Many people think that when they invest their valuable money, it can be received back at regular intervals with an insurance cover. If you are a person of this kind then these insurance plans will be a great match for you.

As its name suggests, moneyback plans are those plans in which you receive your invested money at regular intervals. After the maturity of your policy, you receive maturity benefits with a bonus.

If any mishappening occurred with an insured, his/her family received a lump sum amount.

Life Insurance Policy FAQs

What is life insurance?

Life insurance is a contract between you and your insurance company. The life insurance company pays a lump sum amount to your beneficiaries after your untimely death, if you paid your policy premium on time.

What happens if I miss an insurance premium?

In case, you couldn’t pay your insurance premium due to unavoidable circumstances, your policy will not be terminated. Every insurance has a grace period of 30 days in which you can pay your forgotten premium. It is advisable that you never miss a single premium.

What are death benefits?

Death benefits in a life insurance policy are the amount of money, which is paid by an insurer upon the death of the insured.

What is a beneficiary?

A beneficiary is a person who receives money from insurance upon the death of the policyholder. A beneficiary can be called a nominee.

What is a rider of a life insurance policy?

Riders are additional benefits that can be availed by a policyholder at the time of buying or after an insurance policy.

These Riders such as accidental death riders, chronic disease riders, etc provide extra coverage in the time of financial crisis.

Which type of life insurance is best?

The selection of life insurance policies depends upon your unique requirements. That’s why you should choose a life insurance policy with due diligence.

Suppose you want life cover for your family’s protection. Then you should go for Term Insurance.

If you want life cover for wealth creation, you should choose investment plans like Endowment, Retirement Plans, ulip, etc. 

 

Why Life Insurance important?

Here are 4 points describing, why you need life insurance.

  • To support your family in your absence.
  • To fulfill your dreams after retirement.
  • To finance your children’s education.
  • To maintain the impact of loss during an accident or serious illness.
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