Know The 3 Broad Categories of Life Insurance Products

The insurance sector is quite a versatile one offering a plethora of products. While every insurance category is important and must be bought as per family needs, life insurance products are the most critical and sought-after. Depending upon several factors like purpose, investment needs, demographics, etc., life insurance products can be categorized into three main categories.

• Insurance cover
• Mode of investment
• Tax benefits (ULIPs)

1. Insurance Products Providing Pure Risk Cover Pure risk cover products are the traditional insurance products that aim towards covering the life insured in case of a mishap, permanent or temporary disability, hospitalization, critical illness, etc. Generally, health insurance and life insurance schemes fall under this category in which the policyholder pays a premium amount until the defined tenure of the policy.Under the pure risk coverage instruments, there is no maturity bonus associated. The benefit is paid to the policyholder or nominee on the occurrence of specified events under the products.
2. Pure Savings Insurance Products The next category is of pure savings insurance products that are predominantly governed by the aim of making a saving or investment. A major portion of the premium is secured towards the saving part while the smaller portion is contributed towards risk coverage. The biggest advantage of these products is that they have a triple benefit:
3. One of the most popular products under this category are ULIPs (Unit-linked insurance plans) that are insurance plans which are linked with underlying investment units as per the investor’s choice. These products come with a sum assured at the time of maturity that is relative to the performance of the underlying assets over the investment tenure.More inclination towards equity has a greater potential of generating returns but is also accompanied by a risk of similar potential. Hence, it is important to do some research and ask your insurer before going for this option.
4. A combination of the above two categories The third category is a combination of the above two, which comes with a considerable insurance cover and savings as well. Under these insurance products, the investments are not as aggressive as in ULIPs, and a much bigger portion of the premium is secured towards the risk coverage.

Based on these categories, you can select the insurance plan that fits best with your insurance and saving needs.

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.