All The Information You Need On Types Of Life Insurance Policies

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A life insurance policyis often one of the first things that people take when they start their careers. A life insurance policy not only provides protection against any unforeseen events, it is also an investment for the future that can be a financial buffer for major life events. Whether it is pension plans or child insurance policies, it is important to know all about the different types of policies available before choosing to invest your money in one. Information is the key to better decisions, so find out all that you need to know about insurance here.

When studying the different types of life insurance available, there are certain terms that are occur commonly among them. Understanding these terms will give a better knowledge of what insurance policies are all about.

Term Insurance

The most basic type of life insurance that only provides life coverage without any savings or profits. Since the premiums are cheaper, they are more affordable and hence very popular. If the policy holder survives the policy term, there is no payout but if the policy holder expires during the policy term, the sum assured is paid to the beneficiaries.

Unit-linked Insurance Plans (ULIP)

In these policies, the money is invested in the stock market and hence the performance of the plan depends on the stock market. They are different from mutual funds in that they combine both insurance and investments.

Endowment Plans

In these policies, the sum assured is given to the beneficiaries/policy holder irrespective of whether the policy holder survives the policy term or not. This is called maturity benefit. The premiums are higher for these plans, as the sum assured is paid along with profits to the beneficiary or policy holder. The premiums are invested in both the debt and equities markets to generate the profits.

Whole Life Policy

In this, the term for the policy is not predetermined so the coverage extends to the entire life of the policy holder. The premiums are paid out by the holder until death, after which the family is given the corpus funds. 

Pension Plans

These plans guarantee a stable financial future for people even after they retire. This is useful for both government and private employees and is especially useful for those who are self employed. They offer investment returns as well as insurance. The premiums paid are invested in securities that are government approved. So while the premium is protected, the profits are also generated. The policy holder can decide when to start getting the pension, which is termed the annuity phase. The holder can withdraw any amount that is up to 33%of the total amount and get the remaining amount as regular monthly/quarterly/half-yearly/yearly pensions.

Child Insurance Policies

These plans are to provide children with all their future educational needs by saving and investing in the present. Risk cover is offered for the child’s life during the term of the policy as well as extended beyond it. This also insulates against rising education and other basic costs for childcare.