Life insurance is a complete necessity nowadays. However, the cost is a factor and many people refrain from buying these plans simply because they can’t afford to buy them. Thankfully, the insurance sector has taken note of this and these days we have some very affordable types of life insurance. Term life insurance is one of the best examples of this. You can get a term plan at a very low price and enjoy a high cover. Take a look at this article to know more about the different types of life insurance plans and how they can help you out.
List of life insurance plans
Life insurance is available in various forms. Some of the most common types of life insurance include:
- Term life insurance: Like mentioned above, term life insurance is a very affordable type of life insurance. You can get a high cover for a low cost. Term plans are pure life insurance plans without too many frills. As a policyholder, you are promised that a sum assured will be paid out to your beneficiaries if you die within the policy period. If you outlive the period, there will not be anything in return for you. Therefore, there is no return component in a term plan and this is the main reason the premiums are low in such plans.
- Endowment life insurance: This is one of the most common types of life insurance. An endowment policy plan offers you the opportunity to invest and insure together. The premium that you pay is broken up in two parts. The first part goes towards a life fund and is kept safely to give to your nominees after your death. The other part is invested in the financial markets and your money grows. If you outlive the policy period, you get the sum assured paid back. The bonus earned if any is also given and the sum together is known as the maturity benefit.
- ULIPs: Next, we have the ULIPs. ULIPs, or unit linked insurance plans, are another form of life insurance where insurance and investment are tackled together. This is similar to an endowment plan, but the risks are higher and therefore the returns are much higher too. Your money is invested in the share markets. Another part is safely kept in a life fund. You can choose between low risk ULIP funds such as the cash funds or high risk ULIP funds such as the equity funds. This will depend on your risk taking capacities.
- Money back plans: Money back plans are handy types of life insurance where you get the maturity benefit back in parts and at regular intervals. This helps you meet your life’s financial milestones in an organised manner.
- Child plans: This is another common type of life insurance where a parent’s life insurance insured in benefit of the child. It is a money back plan. If the parent dies before the policy matures, the premium is waived off but the plan continues to stay in force. It is therefore a very useful life insurance plan for those who have minor children.
- Pension plans: The pension plans are highly beneficial too as they help you plan for your retirement years. You invest in small amounts over a large period of time and build up a fund. After your retirement, you start getting small instalments and it becomes a suitable income replacement source. Your life remains covered and if you die within the policy term, your nominees receive a sum assured. They also receive the fun you built up to that point of time.
Other key factors
Life insurance is available in different forms. You therefore need to understand how each plan works and then choose the best plan for yourself. While doing so, don’t forget to compare your options as only then will you be able to locate the ideal plan at the best price. Also, check the insurance provider’s claim settlement ratio. You should only buy a plan from an insurer who has a high claim settlement ratio. Finally, keep the cost of the cover in mind. You may want a very high life cover, but the premium must be affordable or else you may end up as a defaulter and lose your life cover.
