5 Types of Life Insurance Plans That You Should Never Think About Before Buying
To help you make an informed choice when purchasing a life insurance plans policy, we will explain the various types of life insurance plans policies and their advantages in this article.
Existing life insurance contracts come in five different varieties:
- Term Plan:
A term insurance policy is just pure life insurance plans and has a fairly straightforward organizational structure. You pay an annual payment to an insurance company, and in exchange, the insurer agrees to pay your family the sum promised in the event of your untimely death. There is no maturity advantage to it (apart from Term Plan with Return of Premium or TROP).
Benefits of Term Insurance: Compared to other life insurance plans policies, it offers greater coverage for a lower price.
A maturity benefit, or the amount of all premiums paid, is included with TROP. On that, no interest is paid.
- Whole life insurance policy
As the name implies, it provides you with coverage for the rest of your life. The insurer guarantees to pay the sum insured to the policyholder’s nominee following the policyholder’s death if the premium payment is made on time. In addition to the sum assured, it has a saving element.
The benefits of a whole life insurance plans policy include the fact that, unlike other types of insurance, it has no set duration. Upon the policyholder’s passing, the dependent receives the sum insured.
In addition to the death benefit, it also features a saving element.
- Endowment Plans:
Endowment plans once more combine saving with security. In the event of the policyholder’s untimely death, the insurers guarantee to pay the promised sum to the nominee if the premiums are paid on time for a predetermined number of years. In the meantime, the policyholder receives a lump sum payment as the maturity benefit if they live out the policy period.
The benefits of endowment policies include a saving component in addition to the money assured. This can be used to save money for specific goals, and you can borrow money against it in case of an emergency.
- Moneyback insurance:
Moneyback insurance combines savings with protection. However, the main benefit of this insurance is that throughout the policy’s term, you will receive periodical payments of a percentage of the sum assured. At maturity, the remaining sum and the bonus are paid. Other life insurance policies cannot receive this benefit. Despite the fact that the policyholder has already received survivor benefits, if the policyholder dies while the policy is still in effect, the entire sum insured is paid to the nominee.
Benefits of moneyback insurance: The liquidity that moneyback plans offer—you receive a portion of the sum assured at regular intervals—is their greatest benefit.
- Plans for unit-linked insurance (ULIPs):
A unit-linked insurance plan, or ULIP for short, combines investing with insurance. A fund manager chosen by the insurance company makes investments in debt and stocks. The policyholder, however, has the option to decide how much money should be invested in debt vs equity. Although there are no assured returns, the policyholder is given a lump sum payment at maturity. However, the insurer will pay him/her an amount assured if they pass away while the insurance is in effect.
Benefit of ULIP: ULIP offers a better return than conventional insurance with a savings component, despite the fact that there is no return guarantee.