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Life Insurance is a contract between an insurance policyholder and an insurance company, where the insurer promises to pay a sum of money in exchange for a premium after a set period or upon the death of an insured person. Depending on the contract, other events such as terminal illness or critical illness can also trigger payment.
- TERM PLAN
- ULIP
- ENDOWMENT PLAN
- CHILD PLAN
- RETIREMENT PLAN
Term Life insurance provides life insurance coverage for a specified term, for a fixed period of time at a fixed premium rate. Term life premiums are based on a person’s age, health, and life expectancy
In case of untimely death of the life insured during the policy term, the nominee of the life insured gets the Total Pay-out. The benefit can be paid out as a lump sum pay-out and/or as a Monthly pay-out.
Therefore Term insurance plans are said to be pure protection plans which ensure financial stability of the dependents in case of untimely death of the life insured. The policy does not accumulate cash value.
Unit Linked Insurance Plan offers dual advantage – coverage and a means of investment. The total premium paid by the insured is divided into two parts: one that is invested in the market or debt funds and the other that is used for insurance. The type of investment is selected by the insured depending on the type of risk that he/she is willing to take and depending on end use of the funds.
Endowment policy offers both coverage and a means for saving. Like any other life insurance plan, here, the beneficiary gets the sum assured in case of the death of the insured. However, if the insured survives the plan, he/she gets the maturity benefit.
Key Features of Endowment Policies:
- Sum assured in an endowment policy is payable either on survival to the term or on death occurring within the term.
- Endowment policies are available as ‘With Profit’ and ‘Without Profit’ plans.
- Under Endowment policies, bonus for the full term is payable on the date of maturity or in the event of death, whichever is earlier.
- Premiums for endowment policies can be limited to shorter term or can be paid as single premium.
- Premiums cease on death or on expiry of the term, whichever is earlier.
People can take this insurance plan if they want to save money for the future of their child along with getting a coverage for the breadwinner. It is a combination of savings and insurance, where the insured can use the money for the future needs of the child like higher education. The investment in this plan can be started soon after the birth of the child and one can withdraw money after the child reaches a certain age. Some child policies offer intermediate withdrawal options as well. This can be either a ULIP or an endowment plan. The death benefit is available as a lump-sum payment after the death of parents.
Also known as pension plans. Taking insurance policies for the sake of the family is not enough. One should also keep one’s old age in mind. These policies are a fusion of investment and insurance, but during old age the situation can change. So, one needs to plan for the retirement also. Along with coverage, retirement plans give the option of saving and investing money which can be used in the old age. A portion of the premiums goes toward creating a retirement corpus for the policyholder. Life insurance companies in India provide retirement plans which help create a corpus from which a regular income, called annuity or pension, is given to the insured after reaching a certain age. This is available as a lump-sum or monthly payment after the policyholder retires.