Life insurance comes in many shapes and forms. From the simple term insurance to annuities, there are a plethora of insurance policies to choose from. A policy buyer can compare the various policies and invest in the one that is most suited to his needs.
The different types of life insurance are discussed below:
1. Term insuranceTerm insurance is one of the most popular types of life insurance policies. A term insurance plan provides death cover for a fixed term. In case the insured passes away before the end of the term, the life insurance company pays the benefit or the sum assured to the nominee. The death benefit amount is payed to nominee as lump sum, or monthly instalments.
- Gives out a guaranteed amount on completion of the term.
- Very simple policy with low premiums.
- Term period is variable and can be customised.
- Can be used for critical illnesses by paying additional premium.
- Tax benefits under section 80C.
- You may outlive your term insurance in which case you won’t get any money
- Your lifestyle choices like smoking may increase your premium amount.
2. Endowment PolicyAn endowment policy is different from the term insurance in that it provides money on maturity of the plan as well rather than just death. This money can not only be used by the dependants but also by the policyholder after the maturity period.
- Can be used as a retirement fund
- Returns on investment.
- Tax benefits under 80C and 10D.
- The bonus provided over the premium may not be huge
- Longer maturity period
- Higher premiums
3. Money Back PolicyUnder this plan, the insured gets a percentage of sum assured periodically, rather than the lump sum amount at the end of the term.
- Fixed periodic amount
- Assured sum on maturity
- General life insurance benefits
- Poor returns on investment
4. ULIPsUnit Linked Insurance Plans or ULIPs are a life insurance product in India that provide life coverage along with options to invest in stocks, bonds and mutual funds. It is essentially a comprehensive plan that provides the benefits of both insurance and investment. Under this insurance plan, a part of the premium amount is used for insurance and a part is invested in funds; the insured, depending on their risk appetite can choose to invest in different funds offered by insurance company.
- Good for risk takers who wish to create wealth.
- Low fund management charges.
- Market volatility affects ULIPs.
- No provision of emergency cash out.
5. ULPThe hallmark of a Universal Life Insurance or ULP is its flexibility. It lets you change the premium amount, the tenure of the policy, and the sum assured. The only disadvantage is that the market volatility can affect the plan.
The above points give a clear picture of the different life insurance policies. Choose the one most suited to your investment plans and get appropriate cover.
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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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