Life insurance policies in India have evolved over the years to meet diverse protection and savings needs. While term plans continue to offer straightforward protection, innovative options now exist that effectively blend risk coverage with wealth accumulation.
This blog discusses the major types of life insurance policy available in India and how they can address different requirements. Read on to make an informed choice!
1. Term Insurance Plans
Term insurance plans remain the most basic yet essential life cover one should buy. As the name suggests, these policies provide a pure risk cover for a specified term or period. In case of the policyholder’s unfortunate demise during the policy tenure, the insured amount or sum assured is paid out to the nominated beneficiaries.
Key Features
- Provides financial protection to dependents in case of the insured’s untimely death
- Premiums are low as there are no savings/investment components
- Policy terms typically range from 5 years to 30 years
- Some plans provide coverage till the age of 60 or 70 years
2. ULIPs – Unit Linked Insurance Plans
Unit-linked insurance Plans (ULIPs) are one of the most favoured options for those wanting insurance and investment under a single plan. A portion of the premiums paid goes towards providing life cover, while the remaining portion gets invested in funds of one’s choice across asset classes like equity, debt, etc. The plan value grows based on the fund’s performance over time.
Distinctive Benefits
- Seamless insurance and wealth creation
- Flexibility to allocate investments across funds
- Fund switching, premium redirection allowed
- Better control over investments
- Loyalty additions, reduced charges over time
ULIPs can be excellent solutions for long-term goals while enjoying insurance!
3. Endowment Insurance Plans
Endowment policies offer the dual benefits of risk coverage and guaranteed savings. Part of the premium goes towards securing a life cover sum assured for your family, while the rest gets invested in building a maturity corpus over the long term. Under such plans, lumpsum payouts are made either on death during the policy term or on survival at maturity.
Why Consider an Endowment Plan?
- Safe medium for wealth creation with insurance
- There is little investment risk with returns akin to debt funds
- Suitable for retirement planning, children’s goals
Endowment or savings-oriented plans are apt for risk-averse individuals wanting guaranteed benefits.
4. Whole Life Insurance Plans
As implied by the name itself, whole-life plans offer the comfort of lifelong financial security. The policy continues throughout one’s lifetime, offering protection and stable returns simultaneously. The premium-paying term is limited, while coverage continues until 100 years or the insured’s lifetime.
Key Features
- Lifelong risk coverage
- Accumulate cash value through bonuses
- Flexible premium payment terms
- Loan facility against cash value
- Pay premiums for a limited duration only
Whole-life plans make for ideal legacy planning tools besides offering lifelong insurance.
5. Child Insurance Plans
Child plans are specially designed insurance-cum-investment schemes to build a sizable education corpus for your child by maturity. While ensuring funds for critical milestones, these plans also provide life cover, securing the child’s financial future in case of unpleasant incidents.
Why Go For Child Plans?
- Dual benefits of savings and insurance
- Create funds for education, weddings, etc.
- Waiver of premium on policyholder’s death
- Flexibility in premium paying modes
- Lumpsum payouts at critical milestones
For doting parents wanting to do the best for their children, child plans make for excellent all-in-one solutions.
6. Retirement Plans
Retirement or pension plans have emerged as a popular way to accumulate a retirement kitty while enjoying life-cover benefits. As the name implies, retirement plans help build a steady retirement corpus through regular premium payments during one’s working years. Vesting happens at retirement, after which a regular pension is paid throughout life.
How Do These Plans Help?
- Forced savings model for retirement
- Choice of annuity payouts for stable income
- Usually, high life cover at low charges
- Avail tax breaks on contributions as well as vesting payouts
Those who want to maintain their lifestyles should consider retirement plans after quitting their jobs.
7. Group Insurance Plans
Also called corporate plans, group insurance schemes provide insurance coverage to a company’s entire employee group under a single policy. The employer is the policyholder who pays the group premiums annually to ensure adequate employee risk coverage. The insurer also issues individual certificates.
Salient Features
- Cost-effective way to cover employee groups
- Flexibility in sum assured limits and riders
- Hassle-free enrollment of new employees
- Premiums borne entirely or partly by the employer
- Tax benefits on group premiums
Conclusion
Life insurance plans in India, across types, aim to address varied protection, wealth creation, and legacy-building needs across life stages. Evaluate each option keenly before deciding on a suitable investment for you and your loved ones. Stay insured to enjoy true financial freedom in life!
