What Are Life Insurance Plans And Their Types?

Life insurance is a contract between an insurer and a policy owner. A life insurance policy guarantees the insurer pays a sum of money to named beneficiaries when the insured dies in exchange for the premiums paid by the policyholder during their lifetime. For the contract to be enforceable, the life insurance application must accurately disclose the insured’s past and current health conditions and high-risk activities.

In this article we will discuss at length the various types of life insurance available for you.

Types of Life Insurance Policy

Here's a list of the various types of life insurance policies available for everyone: 

1. Term Life Insurance

Term life insurance is a type of life insurance that provides benefit to the beneficiary only if the insured dies a specified period. If the policy holder serves until the end of the period the Insurance Coverage ceases without value and Payout or death claim cannot be made. Term life insurance is income replacement that remains active for a specific number of years. 

2. Whole Life Insurance

Whole life insurance is an insurance plan that provides you coverage throughout your lifetime provided the policy is active. Whole life insurance policies also contain a cash value component that increases over time. You can withdraw your cash value or take out a loan against it as per your convenience. In addition, in case of your unfortunate demise before you pay back the loan, the death benefit paid to your beneficiaries will be reduced. 

3. Endowment Policy

It is defined as a type of life insurance policy that is payable to the insured if he or she is still living on the policy's maturity date or to the beneficiary otherwise. Endowment plans provide you with a dual combination of protection and savings. In this policy, if the insured dies during the term of the plan, the nominee receives the sum assured plus the bonus or participating profit or guaranteed additions, if any. The bonus of profit is paid for the number of years that the insured survives on the policy terms. 

4. Money Back Plan

Money back plan gives you money during the policy tenure. It gives a percentage of the sum assured at regular intervals during your policy terms. If you live beyond the term of the Insurance policy then you will receive the remaining portion of the corpus and the accrued bonus also at the end of the policy term. 

5. Savings and Investment Plans

These are the type of insurance plans that provide you the assurance of lump sum funds for you and your family's future expenses. While providing an excellent saving tool for your short term and long term financial goals, this sum also assures your family a certain sum by way of an insurance cover. This is a broad categorization that covers both the traditional and the unit linked plans. 

6. Unit Linked Insurance Plans

ULIPs are a type of insurance plan that provides you with a dual advantage of Protection and flexibility in Investment. It is a type of life insurance where the cash value of the policy varies according to the current net asset value of the underlying investment assets. The premium paid is used to purchase units in Investment assets chosen by the policyholder. 

Conclusion

Life insurance is not just to fulfill the daily expenses of the family in the absence of a breadwinner. It should be capable enough to ball out the family during large financial exigencies. So, one should always choose one or two best types of life insurance which can support his or her family in different stages of life. 

Also read - What Is PPF? What Are Its Benefits?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.