A life insurance policy is arguably the most important form of insurance that one can undertake. Life is full of risks and death is an inevitable factor. Life insurance makes sure that your family is taken care of in the event of your death. If you are the sole breadwinner in the household, your death will financially impact your family. Life insurance acts as a life-long investment tool where you can also avail the maturity benefits given that you outlive the policy terms. With that said, here are the different types of life insurance that you will need to keep in mind in order to make the most of the scheme and reap the benefits for your family.
7 Types of Life Insurance Policies You Should Consider
1) Term Life Insurance
This is the most basic form of a life insurance policy. When the insured person dies, the beneficiaries can avail the benefits of the policy. However, with this, there is a caveat, once the policy matures past a certain point, the insurance company is not liable to pay you anything.
2) Whole Life Insurance
This type of insurance remains active till the day you die, and once you do, the nominee of the policy will get the pay-off. This can take the form of a paid sum assured and bonuses if there are any to be considered.
3) Child Insurance Plan
Also known as a Child plan, it is basically a combination of insurance coverage and an investment where you can create a corpus for your child’s future. It provides financial coverage to multiple stages of the child’s life and gives them a financial cushion to fall back on as they grow.
4) Pension Plan
On the opposite end of the spectrum, there is the pension plan, which helps you lay the groundwork for your retirement. The benefits are given annually or once you reach 60, such as in the case of a National Pensions System (NPS) account holder. Unlike the basic insurance plan, beneficiaries or the insured can claim the maturity benefits of this plan if the policyholder outlives the policy term.
5) Endowment Insurance Plan
Similar to a pension plan, the endowment plan has a dual function of a savings scheme and life insurance policy. It allows the policyholder to have regular savings for fixed amounts of time, while also providing life coverage. When the insured outlives the policy term, they can claim the maturity benefits.
6) Unit-Linked Insurance Plan
Much like the endowment plan, a portion of your money is saved and put towards life coverage, the other portion, however, does not just sit there, it is invested into market instruments. This provides the policyholder with returns as well as coverage and savings. This is similar to an investments plan where policyholders periodically invest small chunks of their money into the market, which can vary. It can be weekly, monthly, quarterly. Think of it as micro-investments.
7) Money-Back Plan
For those looking to have coverage and also gain the benefits of liquidity, you can invest in this plan. It gives policyholders a specific percentage of their money back at regular intervals, over a period of time.