Different Types of Life Insurance Policies in India
Listed below are the various types of life insurance policies in India:
| Term Life Insurance or Term Plan | A pure protection plan that offers death benefit to the policyholder’s loved ones in case of an unforeseen event. |
| Whole Life Insurance | Provides life cover for the entire life or till 99 years of age. |
| Unit Linked Insurance Plan (ULIP) | Invest in a mix of diversified equity and debt funds with just 5-year lock-in for partial withdrawals |
| Endowment Plan | Surety of receiving the intended sum at maturity |
| Money Back Plan | Plan your cash flows for goals like child education and marriage |
| Retirement Plan | Build a retirement corpus or build a pension for your golden years |
| Child Insurance Plan | Invest in a child’s higher education and marriage goals under the safety of life cover |
| Group Insurance Plan | Useful for corporates and other organisations to cover their employees and customers against unforeseen hazards |
| Savings & Investment Plans | Channelise your savings towards a future goal |
Term Life Insurance
Term life insurance is the most popular type of life insurance. It is widely considered to be the simplest and purest form of life insurance. Term plan offers a death benefit to the policyholder's beneficiaries if the policyholder passes away during the policy term.
Term insurance is the most affordable type of life insurance. Its most distinctive feature is the high amount of coverage offered at extremely nominal premium rates, making it cheaper than any other type of life insurance policy.
In general, term life insurance does not offer maturity benefits. However, certain term plans also offer maturity benefits, i.e., term plans with return of premiums (TROP) if the policyholder outlives the term. One can also increase the coverage offered by a term plan by opting for additional riders, such as Accidental Death Benefit or Child Support riders.
Whole Life Insurance Plan
Whole life insurance is a type of life insurance that offers coverage right until the death of the policyholder. In this policy, you can opt for either a participating or non-participating policy, per your financial needs and risk appetite. Though the premiums for participating whole life insurance are higher, dividends are paid out at regular intervals to the policyholders. The premium rates for a non-participating policy are lower, but the policyholders generally cannot avail themselves of the benefits of regular dividends.
ULIP - Unit Linked Insurance Plan
Unit Linked Insurance Plan or ULIP is a type of life insurance product that offers dual benefits of investment and life insurance. Among the different types of life insurance policies available, ULIPs enjoy a high popularity owing to their versatility. A portion of the premiums paid is directed towards ensuring insurance coverage, while the rest of the premium is invested into a bouquet of investment instruments, which can include market-backed equity funds, debt funds, and other securities.
ULIPs are extremely flexible since investors can easily switch or redirect their premiums between the available funds. They are also touted as having an edge over other market instruments in terms of tax-saving benefits, since their proceeds are exempted from LTCG (Long Term Capital Gains).
Endowment Policy
Endowment Policy is a type of life insurance policy that acts as an instrument for insurance and saving. These plans aim to provide maturity benefits to the life insured in the form of a lump sum payment at the end of the policy tenure, even if a claim hasn’t been made. It is the most suitable type of life insurance for people seeking maximum coverage and having a sizable savings component. They help the policyholder inculcate the habit of savings, even while providing financial security to their family. Endowment plans can broadly be classified into two types: with profit and without profit. Policyholders can choose from these two types based on their risk appetite.
Money Back Policy
One of the best types of life insurance policy is a money-back plan, which offers policyholders a percentage of the total sum assured at periodic intervals in the form of Survival Benefits. Once the policy reaches maturity, the remaining sum-assured amount is handed over to the policyholder. However, if the policyholder dies while the term is ongoing, their dependents are given the entire Sum Assured without any deductions.
Read more about - Money Back Plans.
Retirement Plan
A retirement plan is a type of life insurance that provides policyholders with financial stability and security post-retirement. After retirement, people lose their regular income from employment. Investing in retirement plans can help them create a stable regular income stream. If they continue to invest until retirement, the plan will take care of their expenses after retirement. It requires the policyholder to invest some of their income regularly during working. At retirement, the amount they create over the years will be converted into a regular income stream. Retirement plans also involve death benefits. Thus, if the policyholder passes away during the course of the policy, their beneficiaries will be provided with an assured sum.
Child Insurance Plan
A child insurance plan is a savings cum investment plan that provides financial protection for the child’s future upon the unfortunate demise of the policyholder. It is ideal for ensuring the child's future needs are well taken care of, even in the absence of the life insured. Parents can invest in the best child insurance plans, to meet the financial requirements for their child’s education and marriage or to fulfill many other financial goals their child might have.
Group Insurance Plan
A group insurance policy is a type of life insurance that covers a group of people inside a single insurance policy. Unlike individual life insurance policies, which cover one person for a period, this plan covers a minimum of 10 members.
Employers, banks, corporations, and other homogeneous groups can buy group life Insurance policies for their employees and customers. While employers would want to offer financial protection to their employees' families, banks and lending institutions aim to keep the debt off the borrowers’ families after their death.
For example, Ram is the manager of a firm. To protect his employees, he has taken a group insurance policy. Now, the policy will be issued to Ram in the firm's name.
One of the distinct features of these life insurance policies is that you get insurance until you are part of the group. If you leave the group, your cover ceases to exist.
Savings and Investment Plan
Savings and investment plans are the plans that channel your regular savings into long-term investment goals. It is a life insurance cum savings plan that offers a life cover along with guaranteed maturity benefits. With this, you can plan your investments to achieve your life goals smoothly.
You can also protect your financial goal with a premium protection option. This option allows the planned investments to continue even after your demise.
