Types of Life Insurance

Life Insurance today is an essential investment that a person has to make in order to protect themselves from financial duress in difficult times. Expenses are constant in difficult times as well, from bills to loans one has to maintain their financial obligations and also build their savings for future expenses.

In the event where the income supporting these expenses is disrupted, one can face great distress and resort to liquidating important assets and savings. Life insurance plans ensure such a situation can be mitigated by offering coverage and monetary benefits at the end of one’s term tenure which can be used by the policyholder to fulfill their long-term goals or investments.

Life insurance plans can be defined as monetary insurance solutions that enable the coverage of the requirements of the insured and their dependents through an assured benefit sum in the event of the policyholder’s demise. A standard life insurance policy in India is one of the most economically viable means of securing one’s future where premiums are affordable and one can avail customised pay-outs and coverage as per their convenience. There are different types of life insurance plans that one can seek to provide coverage for themselves at a time of need. Let us look at some types of life insurance that people can invest in for a secure future:

ULIP:

A Unit Linked Insurance Plan is an investment and insurance instrument within one plan. ULIP plans are maintained by premiums paid by investors, the frequency of these payments can be monthly or annual. The basic feature of a ULIP plan is that it allocates a part of the paid premium towards investments and the remaining towards life insurance coverage. As these investments are generally market-linked, they stand as moderately risky. However, an investor has the choice to move towards different investment options as per their risk appetites.

The units stand for the accumulated units to the investor which stand for their market-linked investments, similar to equity mutual finds. These units are proceeded to be converted into a corpus on the basis of the NAV at the time of conversion. 

Term Insurance:

A term life insurance plan is a plan that covers the monetary needs of the insured and their dependents through an assured benefit sum in the event of the policyholder’s demise. Often deemed as the best term insurance plan in India, a standard term insurance policy is considered to be one of the most affordable means of securing one’s future where premiums are affordable and one can avail customised payout methods and coverage.

The policyholder/beneficiary also receives a death benefit sum over nominal premiums costs; which can enable the beneficiaries to meet their expenses, pay off any existing debt or even fulfil educational expenses without compromising on their goals. 

The financial support provided by term plan insurance is not limited to death or maturity. A policyholder can add riders to their existing plan for situations such as accidental death, disability, critical illness, and waived premiums for a price that is added to the existing premium cost.

Child Insurance:

A child insurance plan as life insurance is an investment instrument to help to build a financial corpus for their child over a determined time-period, suited as per the child’s future necessities. Child insurance plans, although offered of all types, follow a basic pattern where the investor makes nominal premium payments into a fund, where these accumulate over time. These plans can often give immediate payments to cover a child’s expenses in the unfortunate event that their insured parent passes away. The maturity of benefits of a child insurance plan is usually processed in the pattern as determined by the insured, which can be annual installments of a lump sum payout when the child turns 18. It is an essential tool for inflation-adjusted financial planning for the child’s future as supported by the parent for cost-intensive expenses such as higher education or marriage of a child when they are of age. 

Retirement Plans:

Retirement plans as life insurance plans are investment instruments that can be utilised by potential investors to fixate a certain portion of their income towards their foreseeable future; preferably maturing at the time of their retirement from the workforce. Retirement plans are considered an essential investment, as after retirement they cease to be on their company’s payroll and their regular income which was used to support their financial obligations may be disrupted. There are many types of retirement plans in India, as one may choose to invest at different points in their life or choose a different payout method.

Retirement plans operate on the basis of monetary benefits like the annuity benefit which can vary from policy to policy since it has to cater to people of all kinds of retirement needs. The most standard types of annuity that can be found under most retirement plans are Deferred Annuity or Immediate Annuity. A policyholder may choose whether they pay premiums over a period of time, or they can pay a single, one-time premium which can allow them to earn a pension from that point onwards.

All types of life insurance plans are structured to allow a policyholder to navigate financial distress and protect their dependents in unforeseen eventualities. Reach out to your financial advisors and find the best suited life insurance plan tailored to serve all your insurance and coverage needs.