What is Life Insurance?
Life Insurance is about more than just being a good financial tool; you promise to protect those who rely on you. But what if the worst happens and you die unexpectedly, leaving your family without an alternative source of support?
That is where life insurance comes into play; it is known as a financial lifeline for your close ones, ensuring they have all that they need when you are no longer around to provide (read our post on the cost of living once per year).
It provides a life cover that pays the sum assured on death or after specified years in return for periodic premiums. While the intention is to give you protection ideally, most of these plans also work as savings or investment mechanisms meant to help you meet long-term objectives such as your retirement kitty, wealth creation, and funding for your child’s education.
7 Types of Life Insurance You Can Invest in
India has a plethora of life insurance plans that cater to specific requirements, economy and life stages. This post will take a look at the major types of life insurance so you can determine which one is right for your financial path.
1. Term Insurance Plans
Term insurance is the most basic and cost-effective form of life coverage. It is basically for pure protection – you get a payout to your nominees in case of death during the term. It lacks the maturity benefit and all, but ya maximum coverage at the lowest premium can be a good option for those who are looking only to get solid financial security without burning holes in their packets.
Features and Benefits:
- Paying for only Life Cover and Nothing returns on maturity.
- Some of the lowest premiums for any life insurance product.
- Premiums cost less when bought at a young age.
- Riders — something the word may remind you of that add-ons when buying a mobile handset, like critical illness cover or accidental death benefit.
2. ULIPs stand for Unit Linked Insurance Plans
ULIPs combine life insurance and investment as one package. The premiums you pay are divided: part of the premium goes toward providing life cover, and the rest is invested in market linked funds that you get to select as per your risk appetite. Whether it is aggressive high-risk growth that you are targeting or one with a more balanced approach, ULIPs can really help in devising an investment plan around your choice while also letting you take advantage of financial protection.
Features and Benefits:
- Insurance plus investment concept
- Build your portfolio with equity, debt, or hybrid funds choices.
- Open architecture to switch funds and partial withdrawal.
- Additional benefits like loyalty additions and wealth boosters.
3. Endowment Insurance Plans
If you’re someone who loves the idea of saving along with a safety buffer, endowment plans are an excellent choice for you. Life insurance and assurance are provided under an endowment policy that includes a guaranteed lump-sum reward at the end of the policy duration or given to the beneficiaries if you pass away. It’s a fantastic way to get life protection along with guaranteed sum accumulation, and you can get more through bonuses.
Features and Benefits:
- Savings and life protection in one.
- Endowment and death benefits are offered.
- Possible bonuses on top of assured sum.
- Premium and maturity are both tax-free.
4. Money Back Insurance Plans
If you need access to cash at regular intervals, this is the ideal plan. Money-back policy is a kind of endowment policy in which the company pays a portion of the sum insured at regular intervals throughout the policy term. It’s ideal for individuals who want income stability but wish to save for the long term.
Features and Benefits:
- During the policy term, there are regular payouts.
- At maturity, a lump sum amount is payable.
- The policy vests even as payouts are made.
- Tax-free funds and premiums.
5. Whole Life Insurance Plans
Designed for those seeking life-long coverage up to 99; gender-neutral, leaving a financial legacy — that your dependents will be taken care of no matter what. The bonus is that often, there is a guaranteed income after some time. All this makes it very appealing for long-term planners.
Features and Benefits:
- Lifetime coverage lasting to age 9950+ years of protection
- Provides an amount of money after a number of years.
- Regular income in addition to mature benefits.
- Tax-free Income as per Section 10(10D) of the IT Act
6. Child Insurance Plans
Child plans are literally the insurance plan that secures your child’s needs and education or financial goals in the future. These schemes accumulate a corpus over time, with maturity benefits usually paid out at the age of a child. Apart from a life cover for the parent means you hedge them against future uncertainties in case, god forbid, something happens to you.
Features and Benefits:
- It provides maturity benefits either as a single bouquet or in parts.
- Life cover in the name of the parent
- Flexibility in investments across multiple funds
- Waiver of premium in case child parent dies.
7. Retirement Insurance Plans
Retirement plans are designed to assist you in building a fund for your non-working years and allow us financial sustainability even after you have stopped earning. These schemes allow a combination of equity and debt which is essential for growth with safety as you move forward, helping to maintain the regular income source during your retirement years.
Features and Benefits:
- Amasses a retirement corpus.
- Gives pension at regular intervals after retirement.
- Provides life cover for the policy term
- Investment and returns are free of taxes.
14 Best Life Insurance in India
Life insurance is not a one-size-fits-all purchase. That really depends on your financial goals, life stage, and the degree of risk that you would be comfortable with. It also has a few of the most reliable plans in India:
- ICICI Pru iProtect Smart (Life Cover / TPD with Whole Life option)
- Aditya Birla Sun Life Aasra (ULIP)
- HDFC Life Click 2 Wealth UltraFast Plan
- LIC Jeevan Labh – Endowment Plan
- SBI Life Smart Money Back (Money Back Plan)
- Max Life Insurance Whole Life Super (Whole life plan)
- HDFC Life YoungStar Udaan (Child Plan)
- ICICI Pru Guaranteed Pension Plan (Quench Our Us)
- SBI life insurance
- bajaj allianz life insurance
- HDFC life insurance
- Kotak life insurance
- ICICI prudential life insurance
- Reliance Nippon life insurance
How to Select the Right Life Insurance?
The best life insurance plan is not the one with the lowest premium cost but rather a policy that suits what you need and want. Here’s how to approach it:
- Knowing your need: Whether you want it as pure protection, savings, investment, or a blend?
- Know your risk appetite: Whether you want guaranteed returns or are willing to take a market-linked risk.
- Type of Life Stage: If you are in your 30s-40s, then term plans would be beneficial for the long term. For someone whose age is near retirement endowment or pension plan will make more sense.
- Compare plans: one should give thought and attention to a comparison of various other pension plans on parameters regarding premiums, coverage benefits claim settlement ratios.
- Test for flexibility: Will the plan allow you to make modifications like flexi-premium payments, partial withdrawals, or fund-switching?
FAQs
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What are the 4 basic kinds of life insurance?
There are four major types of life insurance — Term Insurance, ULIPs, Unit Linked Investment Plans, Endowment Plans, and Whole Life Policies.
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What are the two types of life insurance most people buy?
The two widely held forms are Term Insurance and Whole Life Insurance.
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Does multiple life insurance policies make sense?
There are other types of life insurance options to consider when choosing the right policy for your financial needs and your family’s future.
