Life insurance has long been regarded as a crucial financial resource. But few individuals are aware that there are various kinds of life insurance plans. These can all be useful in their own special ways. Some can be viewed as a retirement or investing tool, while others offer security to the family of the primary earner.
One of the most crucial prerequisites for a peaceful, stress-free existence is selecting the proper kind of life insurance coverage. A life insurance policy not only ensures that one’s dependents will be taken care of even after they pass away, but it can also help one develop a sizeable corpus to meet their future financial objectives.
In India, there are numerous varieties of life insurance coverage. A person can select a life insurance policy in accordance with their particular needs.
Here’s a list of the types of life insurance plans, together with their characteristics and advantages:
Term Life Insurance
The most widely used life insurance is term life insurance. If the policyholder passes away during the policy term, it provides a death benefit to the policy’s beneficiaries. However, if the policyholder survives till the end of the policy term, the death benefit can’t be claimed.
The most economical life insurance policies are term policies. The high level of coverage provided at incredibly low premium prices is this plan’s greatest distinguishing characteristic.
Term life insurance typically does not provide maturity benefits. However, some term plans also provide benefits at maturity, such as term plans with return of premiums (TROP) if the policyholder lives longer than the expiration of the policy term. A term plan’s coverage can also be increased by selecting extra riders, such as Accidental Death Benefit or Child Support riders.
Whole Life Insurance Plan
Whole life insurance is a type of life insurance that provides protection until the policyholder’s demise. Depending on your financial needs and risk tolerance, you can choose between participating and non-participating coverage under this policy. Even if the premiums for participating whole life insurance are higher in comparison, the policyholders receive dividend payments on a regular basis. A non-participating policy has reduced premium rates, but the policyholder typically cannot take advantage of monthly dividends.
Term Insurance with Return of Premium
The term life insurance with the premium plans is a term plan that offers benefits at the maturity of the policy. Under this, the individual can receive the entire premium amount that they have paid throughout the policy term.
Endowment Insurance Plan
It is a specific kind of life insurance policy that serves as both life cover and a wealth creation plan. Even if no claim has been made, these plans seek to offer maturity benefits to the life insured in the form of a lump sum payout at the end of the policy term. It is the best kind of life insurance for people who want the most coverage and a significant savings component. Even as these plans provide their family with financial security, they also aid the policyholder in developing the habit of saving.
Retirement/Pension Plans
A retirement insurance plan is designed to give individuals stability and security for their finances once they retire. A reliable source of consistent income can be produced by investing in retirement plans. The plan will assist the individual in covering their post-retirement expenses if they keep investing until then. Throughout their working lives, people can consistently invest a set portion of their income. The money they have accrued over the years will be transformed into a monthly income stream when they retire. Death benefits are another aspect of retirement programmes. Therefore, if the policyholder dies while the insurance is in effect, the deceased’s beneficiaries will get an assured sum.
