Which Type of Life Insurance Policy Should I Go For?

A life insurance policy is a way of protecting your loved ones' financial security in case of your death. Therefore, it's crucial to choose the right life insurance plan by carefully evaluating personal wishes and family wants, along with comparing different policies and choosing the best plan for yourself and your family. So, continue reading to learn about various life insurance policies to make comparisons and an excellent financial decision.

Types of Life Insurance Policies 

In India, there are primarily 7 types of life insurance plans that are available and popular among the masses. 

1. Term Insurance Plan

Because of its affordability, this is the most popular policy plan in India. Here, if the life assured dies before the end of the term, the beneficiary receives the death benefit. The policy also includes a provision for monthly income replacement for the beneficiary. However, a term insurance policy is for a defined period and does not provide benefits.

2. Whole Life Insurance Policy

A whole life insurance policy covers the life assured throughout the rest of his life, even if he lives to be 100 years old. Furthermore, the policy's cash value component grows over time and can be cashed at any moment, even to take out a loan. However, if the life assured passes away before the loan is repaid, the death benefit will be reduced.

3. Unit Linked Insurance Policy (ULIP)

Under a single policy plan, ULIPs provide both life insurance and investment opportunities. The insurer preserves a portion of the paid premium as coverage. It invests the rest in debt, equity, or both, depending on your long-term family and financial goals, such as children's education, retirement planning, and so on.

4. Endowment Plan

The life assured with an endowment policy plan has the benefit of both a life cover and a savings account. After the policy term ends, the maturity benefit is paid to the life assured or beneficiary under this plan. However, if the life assured dies, the beneficiary will get the sum assured plus a bonus based on the number of years the life assured lived during the policy period.

5. Money Back Life Insurance Plan

In this plan, the policyholder receives a portion of the sum assured at regular intervals throughout the policy period. If the life assured survives the term's end, he/she would get the remaining amount from the aggregate and the cumulative bonus at the plan's maturity. However, if the policyholder dies within the policy's term, the beneficiary will get the entire sum assured, minus any previously paid instalments. It is one of the most expensive policy plans because it provides returns within the policy's duration.

6. Child Insurance Plan

This savings-cum-investment plan safeguards your children's future by providing financial support for their educational, career, and personal ambitions. When the child is born, the plan can be purchased, and the money can be withdrawn when the child reaches adulthood. During special events, there are several provisions that assist in making intermediate withdrawals.

7. Retirement Plan

This plan provides regular pension benefits over the vesting period, assisting in financial stability and providing a source of income even after the policyholder retires. If the life assured dies during the policy term, the death benefit is paid to the nominee, under the plan. 

Which Type of Life Insurance Policy Should I Go For?

The best insurance plan for you and your family should be chosen based on your personal and professional demands, as well as your family's lifestyle and future aspirations. So, if you want a simple plan with life coverage, you can go for a term insurance policy. On the other hand, if you would like to invest along with having life coverage, you can purchase a unit-linked insurance policy. Moreover, if you have a child, you can secure his/her future with a children's insurance policy. Besides these, a retirement plan would be best to remain independent even in old age. In conclusion, before investing, it is a good idea to compare all of the policies thoroughly.

You may also like to read - Know the Difference Between Term Life Insurance and ULIPs