Life doesn’t always go as planned. You can take all the right steps to save for the future, but if the unexpected happened, would your family be prepared?
Life insurance is the one piece of every smart financial strategy that no one wants to talk about, but almost everyone needs. It’s designed to help ensure your plans stay on track, even if you’re not there to see them through.
Figuring out which type and how much you need doesn’t have to be hard. We offer both affordable term insurance policies and permanent policies that allow you to build cash value to fund your legacy
If you have a car, you have car insurance. If you have a life . . . well, it only makes sense to carry life insurance, right?
Life insurance is one of the most vital pieces of your family’s long-term financial plan—and it’s the one we want to discuss the least. Its purpose is simple: to replace your income for your family if you die. But with all the choices available, finding a policy that’s just right for you could lead to extreme confusion and frustration.
Fortunately, it doesn’t have to be that way. We’ll take you through the most common life insurance policies and help you find the one you need.
Different Types of Life Insurance Policies in India
- Term Plan – pure risk cover
- Unit linked insurance plan (ULIP) – Insurance + Investment opportunity
- Endowment Plan – Insurance + Savings
- Money Back – Periodic returns with insurance cover
- Whole Life Insurance – Life coverage to the life assured for whole life
- Child’s Plan – For fulfilling your child’s life goals like education, marriage, etc.
- Retirement Plan – Plan your retirement and retire gracefully
Let’s dive deeper to know each plan in detail.
1. Term Life Insurance
erm Life Insurance is the simplest (and usually the most affordable) type of life insurance you can buy. That’s because it’s insurance that does one thing and one thing only: pays the people you choose—your spouse, children, or other beneficiaries—a fixed amount of money if you die. But a term life policy is not worth a thing unless you die during the course of the term. (We said it wasn’t a fun thing to talk about.) The bottom line is, it’s a way for you to proactively take care of your loved ones so they don’t have to worry when you’re gone.
Term insurance is the simplest form of Life insurance plan. Easy to understand and affordable to buy.
A Term insurance provides death risk cover for a specified period. In case the life assured passes away during the policy period, the life insurance company pays the death benefit to the nominee. It is a pure risk cover plan that offers high coverage at low premiums.
There’s an option to add riders to widen up the coverage.
The death benefit is payable as lump sum, monthly payouts, or a combination of both.
There’s no payout if the life assured outlives the policy term. However, these days there are companies offering Term Plans with Return of Premiums (TROPS), where insurance companies payback all the paid premium amount in case the life assured outlives the term period. But, such plans are costlier than the vanilla term insurance plan.
Example: An individual non-smoker male who is looking for a term life plan of Rs.1 crore cover, will cost him approximately Rs.6, 800 to Rs.10, 500 per year.
|AGE||TERM||SUM ASSURED||ANNUAL PREMIUM RANGE|
|25 years||40 years||Rs.1 Crore||Rs.6,800 – Rs.10,500|
Best known for: High sum assured (coverage) at a low premium.
Benefit of Term Plan: In case of an untimely death of the breadwinner, family is supported with an enormous amount of money – sum assured, which helps them to Replace the loss of income caused due to the breadwinner’s death. Moreover, the money could be utilized to pay off loan, monthly household expenses, child’s education, child’s marriage, etc.
2. Unit Linked Plans (ULIPs)
A unit linked plan is a comprehensive combination of insurance and investment. The premium paid towards ULIP is partly used as a risk cover (insurance) and partly is invested in funds. One can invest in different funds offered by the insurance company depending on his risk appetite. The insurance company then invests the accumulated amount in the capital market i.e. in bonds, equities, debts, market funds, or a hybrid funds…
|TERM||SUM ASSURED||ANNUAL PREMIUM||FUND VALUE|
|20 years||Rs.2 lakh||Rs.20,000||Depending on the fund value at the time of maturity.|
Best known for: Long-term investment option with much more flexibility to invest.
Benefit of ULIP: Invest money as per your risk appetite. You have the option to invest either in equity, debt or in hybrid funds through the life insurance company with complete transparency.
3. Endowment Plans
Endowment plan is another type of life insurance plan, which is a combination of insurance and saving.
A certain amount is kept for life cover – insurance, while the rest is invested by the life insurance company. In an endowment plan, if the life assured outlives the policy term, the insurance company offers him the maturity benefit. Moreover, Endowment Plans may offer bonuses periodically, which are paid either on maturity or to the nominee under death claim. On death, the death benefit is payable to the nominee.
Endowment plans are also commonly known as traditional life insurance, although, there is an investment component but the risk is lower than the other investment products and so are the returns.
|TERM||SUM ASSURED||ANNUAL PREMIUM RANGE||BONUS|
|30 years||Rs.10 lakh||Rs.20,000 – Rs.25,000||Depending on the Bonus at the time of maturity.|
Best known for: Long-term saving option for people with much lower risk appetite for investment.
Benefit of Endowment Plan: Long-term financial planning and an opportunity to earn returns on maturity.
4. Money Back Life Insurance
Money back plan is a unique type of life insurance policy, wherein a percentage of the sum assured is paid back to the insured on periodic intervals as survival benefit.
Money back plan are also eligible to receive the bonuses declared by the company from time to time. This way, policyholder can meet short-term financial goals.
|TERM||SUM ASSURED||ANNUAL PREMIUM RANGE||PERIODIC RETURNS||MATURITY BENEFIT|
|20 years||Rs.5 lakh||Rs.20,000 – Rs.25,000||A percentage of Sum Assured paid on regular intervals||Accrued bonuses/Guaranteed Money Back + Coverage|
Best known for: Short-term investment product to meet short-term financial goals.
Benefit of Money Back Plan: Short-term financial planning and an opportunity to earn returns on maturity.
5. Whole Life Insurance
A whole life insurance policy covers the life assured for whole life, or in some cases, up to the age of 100 years. Unlike, term plans, which are for a specified term.
The sum assured or the coverage is decided at the time of policy purchase and is paid to the nominee at the time of death claim of the life assured along with bonuses if any.
However, if the life assured outlives the age of 100 years, the insurance company pays the matured endowment coverage to the life insured.
The premiums are higher as compared to term plans. Whole life insurance plans also offer partial withdrawals after completion of premium payment term.
|PREMIUM PAYING TERM||SUM ASSURED (WITH GUARANTEED MATURITY SUM ASSURED)||ANNUAL PREMIUM RANGE||MATURITY BENEFIT|
|20 years||Rs.3 lakh||Rs.10,000- Rs.15,000||Guaranteed Sum Assured + non-guaranteed bonus (if any) + non-guaranteed terminal bonus (if any)|
Best known for: Life coverage for whole life.
Benefit of Whole Life Plan: Lifelong protection to the insured and an opportunity to leave behind a legacy for heirs.
6. Child Plan
Child plan helps to build corpus for child’s future growth. Child plans help to build funds for child’s education and marriage. Most of the Child Plan provides annual installments or one time payout after the age of 18 years.
In case of an unfortunate event, the insured parent passes away during the policy term – immediate payment is payable by the insurance company. Some child plans waive off the future premiums on death of the life insured and the policy continues till maturity.
|TERM||SUM ASSURED||ANNUAL PREMIUM RANGE||PERIODIC RETURNS||MATURITY BENEFIT|
|20 years||Rs.18 lakh||Rs.1 lakh||Lump sum payouts on regular interval||Maturity benefit + guaranteed returns + non-guaranteed accumulated bonus (if any)|
Best known for: Building funds for your child’s future.
Benefit of Child Plan: Helps in fulfilling your child’s dream.
7. Retirement Plan
Retirement Plan helps to build corpus for your retirement. Helping you to live independently financially and without worries. Most of the child plans provide annual installments or one time payout after the age of 60 years.
In case of an unfortunate event, life assured passes away during the policy term – immediate payment is payable to the nominee by the insurance company. Death benefit will be higher of coverage or fund value or 105% of premiums paid. Vesting Benefit will be payable if the life assured survives the maturity age. In which case, payout will be fund value which has to be utilized for buying an annuity. Best known for: Long-term savings and retirement planning.
Benefit of Retirement Plan: Helps in building corpus for retirement.
This is just a simplified guide to different types of life insurance policies.
Get an expert’s advice from Coverfox.com on buying the right life insurance plan.
Moreover, Coverfox offers NOMINEE ASSISTANCE PROGRAM: That helps the family of the life assured at the time of claim.
- Claim Assistance
- Legal Counselling
- Financial Counselling
- Psychological Counselling