Some different types of life insurance policy are mentioned here in this article. As individuals we are always taught to focus on all the essential things and prioritize the rest accordingly so we must understand and learn the importance of life insurance policy and what exactly is it with various types that it hold.
Life Insurance Policy is a product and an investment of your money to provide financial aid to your family and loved ones in case of any mishap or uncertainty. It is considered important to buy one of these policies for the future uncertainties and it provides you a better shield financially to your family, and relieves you of stress of taking their care all the time and worrying about their well-being. Not just financial security for the future, life insurance policies help you reduce heavy debts if you had any, secure your life and achieve small dreams and goals, secure your retired life, health insurance, risk coverage, various tax benefits and is a good backup in case of any problems or unknown mishap.
Buying life insurance policy is a long term investment which only helps you in long run and can be quite beneficial for the individuals and their entire family. It is the first step for financial planning as one might say.
It is basically done when a policy holder comes in a contract with the investment company and they are entitled to giving financial aid and funding at the maturity or if any unfortunate event takes place. There are various types of life insurance policies that you can invest into and but for future plans and security. You can buy different types of policies according to your plans, needs and the kind of return you wish like at the time of maturity or even between if you make the claim.
What are some different types of life insurance policies?
Following are the different types of Life Insurance Policies :
1. Term Life Insurance / Term Plan
This is also known as complete, pure risk cover as the insurance company covers and provides the policy holder’s all their financial expenses for a specific time period. They are the most basic form of insurance policy which any one can buy because they have cheap premiums and provides you complete life coverage if there is any misfortunate event. However, the insurance company is not entitles to pay you out if your policy expires and there is not claim within for that specific period of time. These are the most affordable forms of life insurance policy and there is no component of profit or loss and just life cover, that’s all.
It basically provides your life cover in case of death or mishap which cannot be anticipated and covers your financial issues, provides you best premiums with least cost and is the most cheap and easy form of life insurance policy. In case of death, you can claim the insurance that you bought and the insurance company will cover all your expenses up to the premium cost. The death layout can be paid as lump sum, monthly interest or even at a combination of both depending upon the company and the policy holder’s family. It is the most easy to understand kind of insurance that one can buy. It is the best among different types of life insurance policy.
Life and death are both the most unanticipated events which can come unannounced and so one must be secure and should plan financially for the future in case of problems which is very important.
To not face the hardships and difficulties after the death of bread earner of the family, term life insurance is the best kind of insurance which secures your families future in days of problem and helps replace the loss of income due to death by the enormous money given as the payout. Also, this policy gives you zero payout if the specific time period expires and there is no claim made within that time period. This is beneficial if u need a policy for just a certain period of time but with 0 profits on the money.
Click here: What is Life Insurance?
2. Unit Linked Investment Policy (ULIP)
This is a comprehensive combination of insurance as well as investment in a single policy. They pay you out the sum assured at the time of death or maturity. As the name suggests it is linked to investment and the market when some amount of money is put to market by the insurance company and invested as funds and covers your life insurance as well in case of any mishap or even death.
Individuals can decide and choose the allocation of the stocks/invested amount in specific company and all this investment into the market is done on the basis of the NAV(Net Asset Value) which determines your profit value and the value that the policy holder gets in return. You get to earn some money and experience some profits if you buy and invest into ULIP. Although you might even have to bare loss due to sudden dip in the market and thus the drop in value of NAV.
The insurance company invests your money in the market in forms of share, bonds, equities, hybrid binds and many more which can yield results and profits. Unit linked investment policy can be termed as a long term investment which gives you a certain fixed amount of payout as well at the end of time period or at the end of maturity and certain other amount of money in the forms of installments which yields from the money invested in market as funds. This helps you build wealth alongside a sense of future security and risk cover.
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3. Whole Life Policy
In this type of policy, the policy holder pays amounts of premiums at installments till death that is for the entire life which even the name suggests and at maturity the family is paid the financial security by the insurance company which held the contract. These are kind of permanent policies with a fixed value of premium which will be received by the family at the end. The premium value adds on over a period of time which you can invest in some companies as well. If the policy lapses, then some of that amount can even be used to cover tax liabilities and thus this kind of policy is quite beneficial for the individuals. It provides the sum assured and survival benefits to the policy holder as well. Also in this type of policy you can ask for installment payouts and get the money in same intervals of time instead of a lump sum paid to you instantly.
4. Money Back Policy
Money Back policy is a kind of policy which ensures life insurance along with the investment plans and covers life insurance against death of the policy holder and also gives you periodic returns as a percentage of the sum assured over some period of time. This is type of endowment plan which will be discussed later. So, the policy holder receives some amount of cash at fixed intervals of time and at the time of death they receive the whole payout of the premium from the insurance company.
This kind of policy has an added benefits of receiving the balance amount of cash if the policy expires and the policy holders doesn’t needs to claim the money. Thus, as the name suggest there is a complete transaction of money back to the holder if no causality takes place. It is unique in the way that some percentage of money assured at the death is paid back to the policy holder at regular interval of time and it can be a best selection for short term investment and can be beneficial to meet short term financial goals of the family and the breadwinner.
It basically provides you survival benefits over a selected time period of the policy. There is assurance of life insurance as well and some monthly or regular payout which helps a family with less income.
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5. Endowment Plans
Most policies doesn’t provides you the sum assured in case of survival or no claim and provides you risk cover in case of death or any unfortunate incident but investing in endowment plans can be beneficial and it is a unique plan where the premium amount is been paid to the policy holder in case of death as well as the survival which can be very helpful as it can be an addition to the income of the holder.
It differs from rest in just one scenario that is maturity benefit and you receive the money in both the cases. However, the initial investment for that premium is quite high with all profits which will be obviously as it gives you maturity benefits as well. The profits earned by the insurance company is basically by investing your money in bonds, shares, equities and many more stuff. It is also termed as the traditional policy.
So, these were some different types of life insurance policy. There are various other plans as well which the individuals can invest into depending on the needs like child plan securing future for their dream home, school and various other expenses, retirement plans securing future after retirement and can be a source of income in those times. Therefore, life insurance policies are actually beneficial and quite important in terms of future planning.