Life Insurance & Its Types
Table of Contents
Life Insurance is financial protection for a human-life contingency, such as death, injury, accident, retirement, etc. Owing to natural and accidental causes, human life is prone to death and disability. When a human life is lost or a person is permanently or temporarily disabled, his/her family loses income, especially if the person is a sole income earner.
While human life cannot be valued, in future years, a monetary amount may be calculated depending on the loss of income. Therefore, the sum insured is the 'benefit' of life insurance. In the event of the policyholder's death or if the policyholder becomes disabled due to an injury, within the lifetime of the contract, life insurance policy offers a definite income.
Also Read:- All About Life Insurance Companies in India
Types of Life Insurance Plans
Life insurance offers financial protection for the insured's family (survivors/nominees/beneficiaries) and may also fulfil other financial objectives. The following are the different types of life insurance plans:
1. Term Plan
These plans are purchased for a fixed period of time, and do not carry any cash value or maturity benefits; hence these policies are cheaper. It is beneficial only on the happening of the event.
2. Endowment Plan
Similar to term plans, these plans come with an additional benefit where the policyholder will receive an assured amount if the policyholder survives until the maturity date.
3. Unit Linked Plan
Offer policyholders to build wealth along with life security. Premiums paid are bifurcated into 2 parts, one for life insurance and the other is invested in market instruments where the policyholder earns market-related returns.
4. Money Back Plan
This plan offers many survival benefits that are allotted proportionately over the policy term period
5. Whole Life Plan
Extends up to the ‘whole life’ of the policyholder and offers the survival benefit to the insured. The policyholder can partially withdraw the sum assured or take a loan against it.
6. Annuity Plans
The premium collected is accumulated as assets and then distributed to the insured in the form of income by way of a lump sum or annuity depending on the insured’s instruction.
Benefits of Life Insurance Plan
Life insurance helps take care of your family if something happens; however, that is only one of the benefits of life insurance. Beyond the coverage amount, different kinds of policies can offer other benefits as well. Here are some of the benefits of life insurance:
- Life insurance offers risk coverage to the insured/policyholder’s family in the form of monetary compensation in return for the premiums paid.
- Life insurance companies offer different types of plans to the insured depending on his need for insurance. Additional benefits come with a more premium.
- Life insurance policies also cover health-related expenses such as hospitalisation expenses and critical illness treatment.
- A few life insurance policies also come with the saving plans, that is, they put your money in profitable ventures.
- Some of the Life insurance policies come with a guaranteed sum assured
- Life insurance companies provide the option to borrow a specified sum of money against the policy, when in emergencies. However, this option is available on selected policies only.
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Conclusion
Life insurance can be a vital part of your financial strategy. Life insurance is a risk minimisation and protection tool which can help the insured and his/her dependents in multiple ways while dealing with a variety of life events. By understanding the key features and benefits of a life insurance policy, you can make an informed decision.
