Types of life insurance policies available in India
cleartax.in 21-07-2015 12:02:30 PM
Life insurance is an integral part of maintaining one’s personal finances. In fact, life insurance should be given more importance than investments. In the time of need, life insurance can turn out to be extremely helpful to the policyholder’s dependants. Read More
Life insurance is an agreement between the policyholder and the insurance company to provide a predetermined amount to the policyholder’s dependants in case of the holder’s demise during the term of the policy. The purpose of life insurance is to ensure that your family and dependants are financially secure in the event of your passing away. This makes it very important for you to have life insurance, particularly if you’re the breadwinner of your family.
However, life insurance should not be bought blindly. There are a number of different types of life insurance policies that are available for the Indian consumer. Different types of life insurance policies offer different types of benefits, which is why you should carefully scrutinise and compare policies before you go ahead and buy one. Here is a concise look at the different types of insurance policies available in India.
Term insurance is the purest form of life insurance. It offers no benefits during the period of the policy, but through term insurance, the policyholder can get coverage for a big amount at a lower premium. This makes term insurance the cheapest type of life insurance.
Unit linked insurance plans (ULIP)
A ULIP offers a mix of insurance and investment. A ULIP can have investments in equity as well as fixed income assets.
Whole life insurance
A whole life insurance policy is similar to term insurance, in the sense that it provides a fixed cover upon death for a low premium. The difference between the two is that while term insurance is valid for a fixed number of years, whole life insurance lasts till the policyholder is alive.
An endowment policy offers life cover for the policyholder and also allows the insured individual to save money on a regular basis. An endowment policy comes for a fixed term and upon maturity, the policyholder gets a lump sum amount.
Money back policy
A money back insurance policy is similar to an endowment policy in the sense that it provides life cover during the term of the policy as well as additional benefits. In this case, the policyholder gets a fixed amount periodically through the term of the policy. Common money back policies have a term of 20-25 years and the periodic benefits are given out every 5 years.
These are the different types of life insurance policies available in India. It’s best to choose a life insurance that meets your requirements and profile.