Here are different types of life insurance plans:
Term life
Such a policy provides risk cover for a specific period of time with no savings/profit component. A fixed sum of money, or the sum assured, is paid out if the policy holder expires during the policy term, otherwise there are no payments made. Since it provides pure life cover, premiums are cheaper than other policies.
Whole Life
A whole life policy covers the policy holder for his or her entire life. The validity of the policy is not defined; the insured pays premiums till his or her death when the corpus is paid out to the family. The policy expires only at the death of the individual.
Endowment Plans
An endowment plan provides risk cover with financial savings. A policy holder gets two benefits: In case of death during the tenure, the beneficiary gets the sum assured. If the individual survives the policy tenure, he gets back the premiums paid with other investment returns like bonuses. In case of death during the policy period, the beneficiary gets the sum assured. Endowment plans thus come with higher fees and charges.
Unit Linked Insurance Plans
ULIPs are a variant of endowment plans because they are linked to the market and provides a combination of life insurance and wealth creation options. The individual can choose allocation in equity markets if the objective is of high capital appreciation or in debt markets if they want steady returns, depending on their risk appetite. ULIPs can thus be used to plan long term goals like retirement, children’s education and marriage.
Money Back
A variant of endowment policies, it provides a combination of life insurance and wealth creation. It gives out periodic payments over the policy term by paying out a portion of the sum assured at regular intervals. If the policy holder survives the term, he gets the balance sum assured. In case of death, the beneficiary gets the full sum assured.
Annuities and pension policies
Under such policies, the insurer agrees to pay the insured a fixed sum of money in a lump sum or periodically after retirement as long as the policyholder or his or partner is living. It can be an immediate annuity, which starts giving returns from the very first month, or it could be a deferred, which starts paying after a certain period. Such policies may be used to provide a steady cash flow during retirement.
