Types Of Life Insurance Policies In India
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Types of Life Insurance Policies in India

Types of Life Insurance Policies in India
  • 19th Sep 2022 |
  • 52,730

A life insurance policy provides financial protection to your family in the unfortunate event of death. At a basic level, it involves paying small monthly sums called premiums. However, depending on the type of life insurance products you have opted for at the policy’s maturity, you will receive returns the policy may have earned over the years. Also, in case of the policyholder’s untimely demise during the tenure of the policy, your family will receive a lump sum amount.

Today, there are various types of life insurance products that cater to a wide variety of needs, such as:

  • Planning for your retirement
  • Saving for a specific goal in the future
  • Planning for your children’s education
  • Ensuring a flow of income in case of the loss of your ability to earn

This article will help you know what is the classification of life insurance.

Types of Life Insurance Plans

Given below are the basic types of life insurance policies in India. All other life insurance policies are built around these basic insurance policies by combining various other features.

1. Term Insurance

The simplest form of life insurance product is a term insurance policy. Being a pure risk cover policy, term insurance protects the person insured for a specific period. In such type of a life insurance policy, a fixed sum of money called the sum assured is paid to the beneficiaries if the policyholder expires within the policy term.

Scenario 1: If a person buys a ₹2 lakh policy for 15 years, his family is entitled to the sum of ₹2 lakhs if he dies within those 15 years.

Scenario 2: If the policyholder survives the 15 years, though the premiums are not returned, the family is offered financial security.

Benefits:

  • Income Tax exemptions: The premiums paid towards term Insurance provides income tax exemption.
  • 100% risk cover: These insurance policies provide 100% risk cover, and hence they do not have any additional charges other than the basics
  • Lowest premiums: Premiums paid for term life insurance policies are the lowest in the life insurance category.
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2. Whole Life Policy

A whole life policy covers a policyholder against death throughout his life. The validity of this life insurance policy is not defined; hence, the individual enjoys the life cover. Under this life insurance policy, the policyholder pays regular premiums until his death, upon which the corpus is paid to the family.

Benefits:

  • More extended cover: The policy does not expire till the time any unfortunate event occurs with the individual.
  • Tax benefits: Premiums paid under the whole life policies are tax-exempt.

Enhanced protection: Increasingly, whole life policies are combined with other insurance products to address various needs such as retirement planning, etc.

3. Endowment Policy

Endowment policies are among the popular life insurance policies, combining risk cover and financial savings. Policyholders benefit in two ways from a pure endowment insurance policy. First, in case of death during the tenure, the beneficiary gets the sum assured. If the individual survives the policy tenure, he gets back the premiums paid with other investment returns and benefits like bonuses.

4. Money Back Policy

Many people prefer this life insurance policy because it gives periodic payments during the term of the policy. In other words, a portion of the sum assured is paid out at regular intervals. If the policyholder survives the term, he gets the balance sum assured.

Benefits:

  • Corpus gain: In case of death during the policy term, the beneficiary gets the total sum assured.
  • Choice of ULIP versions: Various life insurers offer new ULIP versions of money-back policies.
  • Tax benefits: The premiums paid and the returns accumulated through a money-back policy or its ULIP variants are tax-exempt.

5. ULIP

ULIPs are market-linked life insurance products that provide life cover and wealth creation options. A part of the amount people invest in ULIP provides life cover, while the rest is invested in the equity and debt instruments for maximizing returns.

Benefits:

  • Flexibility to invest: ULIPs provide the flexibility of choosing from a variety of fund options depending on the customer’s risk appetite; one can opt for:
  • Aggressive funds: Mainly invested in the equity market with the objective of high capital appreciation
  • Conservative funds: Invested in debt markets, cash, bank deposits and other instruments to preserve capital while providing steady returns
  • Long-term planning: ULIPs can help achieve various long-term financial goals such as planning for retirement, a child’s education, marriage, etc.

6. Annuity and Pension

In these life insurance policies, the insurer agrees to pay the insured a stipulated sum of money periodically. The purpose of an annuity is to protect against financial risks and provide money in the form of a pension at regular intervals.

Thus, whatever your financial requirements, there are many types of life insurance plans to ensure that your requirement is fulfilled as per your needs and planning.

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Features

  • Nominal Cost
  • Multiple Plan Options
  • Flexible Payout Options
  • Critical Illness Rider
  • Tax Savings
  • Long term Coverage

Ref. No. KLI/22-23/E-BB/492

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