Life insurance is one of the most essential financial instruments that one needs, yet, choosing it is no mean task considering the wide array of choices available. To suit the varying needs of people, there are different types of plans, which work best to address these requirements. Read further to know exactly what each type of policy provides to make an informed choice.
Term insurance
This is the most basic type of life insurance, which provides life cover with no savings or investment returns. It is for this reason that these plans cost less compared to other types of insurance plans. When you take such a policy, you pay premiums towards a fixed insurance cover, which is the sum assured. In case of your demise, the sum assured is paid to the beneficiaries you nominate, with no element of savings or investments tied.
Endowment plans
Unlike term plans, these policies have the element of savings and investments attached to the life cover. So in this policy, the sum assured is paid out in case of both survival, at maturity, and death. Since the survival benefit is paid out, the premium outgo in these policies is higher as compared to term plans.
Whole life
As opposed to term and endowment plans, which are offered for a defined time period, say, till the insured turns 65 or 70 years old, a whole life policy covers a policyholder for his or her entire life. There is no pre-defined policy tenure. You can pay premiums till your demise or for a select timeframe, with the policy proceeds going to your dependents after your death.
Ulip
Unlike other plans, the unit-linked insurance plan (Ulip) is a combination of life cover and market-linked investments. In case of death, your dependents will receive the higher of the sum assured or the value of investments, and in case of maturity, the policyholder receives the policy investment value.
Riders
With each life insurance plan, you can attach an additional risk cover to be guarded against accident or ill-health, at some extra cost. This way you can expand the scope of both life and health insurance for yourself, your spouse, parents, or any dependents, to go beyond life protection.
