In India, there are different types of life insurance policies and choosing the best one to suit your need can be difficult. This write-up lists out the pros and cons of different plans to help you take an informed decision.

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 insurance

Term 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.

Pros:
  • 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.

Cons:

  • 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 Policy

An 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.

Pros:
  • Can be used as a retirement fund
  • Returns on investment.
  • Tax benefits under 80C and 10D.

Cons:
  • The bonus provided over the premium may not be huge
  • Longer maturity period
  • Higher premiums

3. Money Back Policy

Under this plan, the insured gets a percentage of sum assured periodically, rather than the lump sum amount at the end of the term.

Pros:
  • Fixed periodic amount
  • Assured sum on maturity
  • General life insurance benefits

Cons:
  • Poor returns on investment

4. ULIPs

Unit 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.
Pros:
  • Good for risk takers who wish to create wealth.
  • Low fund management charges.

Cons:
  • Market volatility affects ULIPs.
  • No provision of emergency cash out. 

5. ULP

The 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.

Learn more about online life insurance plans

DISCLAIMER

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.



Trending Articles

Article Links

Endowment Policy

Money Back Policy

Pradhan Mantri Jeevan Jyoti Bima Yojana

Term Life Insurance

Unit Linked Insurance Plan (ULIP)

Latest Articles

life-insurance
life-insurance

Everything You Should Know About Variable Life Insurance

Read More
Posted on 24 March 2020
life-insurance
life-insurance

Investing in Money Back Endowment Plans

Read More
Posted on 19 March 2020
life-insurance
life-insurance

Money-Back Policy vs Endowment Policy

Read More
Posted on 19 March 2020

Featured Articles

image abc-of-personal-money
abc-of-personal-money

Are Millennials Any Different When It Comes To Planning Financials?

Read More
Posted on 05 February 2020

Relevant Articles

image health-insurance
health-insurance

Best Mediclaim Policy for Parents in India

Read More
Posted on 27 March 2020
image health-insurance
health-insurance

Comparison of Health Insurance Plans in India

Read More
Posted on 27 March 2020
image motor-insurance
motor-insurance

What are Some Common Myths About Two-Wheeler Insurance?

Read More
Posted on 24 March 2020