What Are Some Of The Key Life Insurance Policy Types?
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Term life insurance is a type of insurance that lasts for a set period of time (the term) before it expires. On the other hand, whole life insurance is a type of permanent life insurance that covers you for the rest of your life. There are a variety of insurance products that fall into these two categories, each with its own set of advantages and disadvantages. A quick rundown of the various types of life insurance policies is provided below.
What Are Some Of The Key Life Insurance Policy Types?
To choose the right life insurance plan at the right time, you should be aware of the various life insurance plans available.
1. Unit Linked Plans (ULIPs)
A unit linked plan is a comprehensive insurance and investment package. The ULIP premium is split between risk cover (insurance) and fund investment. Depending on one's risk appetite, one can invest in the insurance company's various funds. The insurance company then invests the funds in the capital market, such as bonds, equities, debts, market funds, and hybrid funds.
2. Endowment Plans
Another type of life insurance plan is an endowment plan, which combines insurance and savings.
A portion of the money is set aside for life insurance, and the rest is invested by the life insurance company. If the life assured outlives the policy term in an endowment plan, the insurance company pays him a maturity benefit. Furthermore, Endowment Plans may offer bonuses on a regular basis, which are paid out on maturity or to the nominee in the event of a death claimWhen the beneficiary passes away, the nominee receives the death benefit.
3. Term Life Insurance
The most basic type of life insurance remains term insurance. It's easy to grasp and buy.
A term insurance policy covers the risk of death for a set period of time. The life insurance company pays the death benefit to the nominee if the insured person dies during the policy period. It is a pure risk insurance plan that provides high coverage at a low cost.
There's also the option of adding riders to expand coverage.
4. Whole Life Insurance
A whole life insurance policy protects the life assured for the rest of their lives, or up to the age of 100 in some cases. Whereas, Term plans remain for a limited amount of time.
When the life assured dies, the sum assured, or coverage, is determined and paid to the nominee, together with any bonuses.
If the life assured survives beyond the age of 100 years the insurer will pay out the matured endowment coverage to the life assured.
5. Retirement Plan
A retirement plan aids in the formation of a corpus for your retirement. assisting you in becoming financially self-sufficient and worry-free. After the age of 60, the majority of child plans offer annual instalments or a one-time payout.
In the unfortunate event that the life assured passes away during the policy term, the insurance company will make an immediate payment to the nominee.
Conclusion
In general, life insurance is divided into two types: pure risk coverage plans, which are purely insurance, and hybrid plans, which are a mix of insurance and investment components. However, it's possible that you're undecided. Or perhaps you need to understand the various types of life insurance policies on the market so that you can make an informed decision.
Do read - Exploring Life Insurance Meaning And 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.
