Brief Overview: How Different Type Of Insurance Products Give You Different Benefits

Different types of Life Insurance can be broadly classified as two types:

1.Pure Risk coverage plan which covers only insurance

2.Combination of investment and insurance

In India, different types of life insurance policies are

Term Life Insurance:

Term Insurance comes under the pure risk cover plan, where it offers high coverage at low premiums. Providing the death coverage is the key area of term insurance. The life insurance company settles the nominee with the death benefit when the life assured passes away during the policy period.

Unit Linked Plans (ULIPs):

Unit linked plans cover not only insurance but also caters investment purpose. Investment is made in a variety of funds offered by the insurance company based on the risk appetite of the investor. The insurance company pools the investment amounts and in turn invests in the capital markets in the form of bonds, market funds, equities etc. Unit link plans are considered as the best- suited option for long term investment.

Endowment Plans:

This type of life insurance policy is a blend of insurance and saving. A maturity benefit is offered to the insurer if he outlives the policy term. At times, bonuses may be offered periodically. These are paid to the nominee either after the death of the insurer or at the time of maturity of the policy. In this type of life insurance policy, both risk and the returns are lower.

Money-Back Life Insurance Policy:

Among different types of life insurance policies, this is a unique type of plan. At periodic intervals, a percentage of sum assured is paid back as survival benefit. The short term financial requirements can be met by choosing this plan. These plans provide the benefit of earning returns on maturity. The companies also pay bonuses for the policyholders from time to time.

Whole Life Insurance:

Term plans are different from whole life plans in terms of the coverage period. Whole life insurance insures the policyholder for whole life, which may extend up to 100 years. These plans have high premiums compared to term plans. The death benefit which is decided at the time of policy purchase is offered to the nominee upon the death of the insurer. Upon completion of the premium payment term, partial withdrawals are also allowed.

Child Plan:

The child’s future needs are secured with child plans. These are formulated keeping in mind the child’s education and marriage. It helps to plan funds as a one-time payout or annual instalments after the age of 18 years. Child plan also includes an immediate payment to the nominee upon the death of the insured parent.

Retirement Plan:

Retirement planning can be done by using these plans. After the age of 60 years, the retirement plans offer a one-time settlement or annual instalments. The higher of fund value or coverage amount or 105% of the paid premiums will be offered as the death benefit. A bulk amount is settled to the nominee in case of unfortunate causality of the policyholder. If the insurer outlives the maturity age, a vesting benefit is paid to the policyholder.

The way forward

The near coming future looks exciting for people who buy insurance products as the government is making certain regulatory framework changes. These changes will translate into added customer satisfaction as the customer is provided with more market engagement.