When it comes to life insurance, there are probably as many different types as there are people who need it. There are different types of life insurance plans because different people need different types of life insurance to meet their specific needs. Different types of life insurance plans have different features and advantages to meet the different needs of their customers. It’s important to understand what type of life insurance plans you need before investing in it. Understanding the different types of life insurance can help you make an informed decision about your personal needs and financial goals. Let’s take a look at each type, its advantages and disadvantages, and how you can determine which one is best for you.
As an important part of financial planning, the main objective of a life insurance policy is to safeguard the financial safety of the family and assets against the unfortunate demise of the policyholder and the subsequent loss of income. The money from the policy helps the dependent family members run their household, take care of children’s education, pay for medical emergencies, and so on.
What is Life Insurance?
Life insurance is a contract that provides financial protection to the policyholder in case of death. The life insurance company agrees to pay out a certain amount of money after a designated time, usually in return for monthly premiums paid by the policyholder.
Guaranteed Income Insurance
A Guaranteed Income plan provides dual benefits of insurance coverage along with a fixed annuity like a life insurance policy, but instead of providing financial coverage after the death of the insured person, it provides guaranteed payments for a certain number of years. It's typically used as an investment vehicle and usually has a guaranteed interest rate.
ULIPs
Unit linked insurance plans (ULIPS) offer life cover along with the benefit of investing money in the market, both high and low-risk individuals are looking to purchase or invest in a low-risk policy at a low cost or fixed premium. This plan comes with risks but has great returns and tax benefits as well. The unit-linked insurance plan is a life insurance plan that is linked to an underlying unit trust fund.
Child Insurance Plan
A child insurance plan is a type of life insurance plan that is specifically designed to provide financial assistance for the continuous and future care of a child. It is meant for parents who want to ensure that their children receive the best care and education even when they are not around. It can be either a standalone insurance plan or combined with another insurance plan.
Group Life Insurance
Group life insurance is a type of life insurance that is purchased by a business or a group of people who are tied together through a common employer, a partnership, or another business arrangement. The main purpose of group life insurance is to protect the lives of people who are part of a group.
Term Life Insurance
Term life insurance is the most basic type of life insurance that lasts for a specific period of time. It can be between one and 30 years, with the average term being 10 years. This type of life insurance is low-cost and affordable, but it doesn’t offer the same level of protection, coverage and flexibility as whole life insurance or cash value policies.
Whole Life Insurance
Whole life insurance is a permanent life insurance policy that covers you for your entire life until the death of the insured person so long as the premiums are paid. It will also accumulate some cash value over time that the policyholder can withdraw or borrow at some point while alive. It pays out a set amount each month until the death of the insured person. Because it’s permanent, whole life insurance can cost more than term life insurance. This type of insurance is used for those who want to invest in it as an investment and not just for the coverage.
Variable Life Insurance
Variable life insurance is a type of life insurance that includes death benefits and cash value accumulation. With variable life insurance, you can customize your premiums and death benefit to fit your needs. The cash value in variable life insurance accumulates tax-deferred, which means you don’t have to pay taxes on it until you withdraw it. One of the biggest drawbacks with variable life benefits is that they must be surrendered if the policy lapses or is terminated early.
Universal Life Insurance
Universal life insurance is a type of permanent life insurance plan. Permanent means that the policy never expires, and its face value remains the same throughout your lifetime. The goal of universal life insurance is to provide coverage while also building cash value. The advantage of universal life insurance is that it provides coverage in the event you die. This type of plan includes high premiums and investment management fees from the company managing your money.
Sabse Pehle Life Insurance Campaign
As a nationwide initiative to create more awareness around the need for life insurance, Life Insurance Council of India came up with a new and innovative campaign called Sabse Pehle Life Insurance in the year 2019. The genesis of this campaign was to make Indians more aware of the importance of life insurance and the benefits of life coverage. To support this cause, all 24 insurance companies in India came together for this awareness campaign.
