There are different types of life insurance products in the market. Understand the basic types of life insurance and figure out the right policy that works for you and your family’s financial needs at various stages of life.
Life insurance products can be divided into two broad categories:
- Pure life insurance – These are plans that solely focus on offering compensation for the insured’s family if the policyholder passes away.
- Life insurance cum investment – These are products that offer not just life coverage but also double as an investment product.
In this guide, we take a look at the various life insurance products available in the market, helping you choose the right one to suit your requirements.
Life Insurance Plans Classification
- Term Plan – Pure Life Coverage
This is the basic type of life insurance. It’s affordable, and the terms and conditions are simple. This plan offers life insurance coverage for the policyholder for a specific period. If the policyholder passes away during this period, the insurer pays the death benefit to the nominee(s). The death benefit is paid as a single lump sum, regular monthly payouts, or a combination of both, depending on the requirements of the nominee.
Apart from the death benefits, there are no other benefits. Term plans offer high coverage at low premiums.
- TROP (Term Return of Premium Plans)
It’s similar to a term plan. But, the only difference is that the premiums you pay over the years are returned if the policyholder survives the policy period. The premiums of TROP plans are slightly higher than regular term plans.
- Whole Life Insurance
As the name implies, this plan offers life insurance coverage for the entire life. It’s similar to a term plan. However, one significant difference is the policy period. Term plans provide coverage only for a specific term, while whole life insurance plans offer coverage for the entire life of the policyholder. In case, the policyholder passes away before the end of the term, the insurance company pays the sum assured along with the bonus to the nominee.
- Endowment Plan
In endowment plans, a part of your premium is reserved for life cover, while the rest is invested in the money market. In this plan, if the insured outlives the policy period, the insurer offers a bonus to the insured on maturity. Apart from the maturity benefit, endowment plans also provide death benefits and periodic bonuses.
As the risk component is lower when compared to other investment cum insurance products, it is one of the most popular life insurance plans.
- ULIP (Unit Linked Insurance Plan)
This is a type of insurance plan that offers insurance and investment opportunities in a single product. One part of the premium you pay for a ULIP plan is reserved for life cover. While the rest is invested in various market instruments like equities, fixed income instruments, debts, etc. depending on your choice. ULIP plans offer triple benefits – life coverage + investment + tax benefits in a single product.
- Moneyback Plan
As the name implies, in this insurance plan, a fixed portion of the sum assured is paid to the policyholder at regular intervals as survival benefit. This plan helps policyholders meet their short-term goals at various stages of life. Maturity benefit, death benefit are the other advantages of moneyback insurance plans.
- Child Plan
This is an insurance product that helps you build funds for major expenses, like a child’s higher education, marriage, etc. A child plan provides lump-sum payments at specific stages in your child’s life. Additionally, if the insured parent passes away during the policy term, the plan provides a lump sum payment while waiving off future premiums.
- Retirement Plan
This is an insurance product that helps you build your retirement corpus. Retirement life insurance plans offer regular annual payouts after the age of 60 or could provide you with a lump-sum payout depending on your requirements. This plan also offers death benefits to the beneficiaries.
