There are various types of insurance on the life offered by 19 different life insurance companies in India. Life Insurance Corporation of India is the only public sector insurance company in India. The remaining life insurance companies are under the private sector and most of the private insurance companies are the joint ventures between Indian companies and foreign companies. You can choose a life insurance policy as per your budget, current earnings, sum assured, life goals and risk coverage. It is possible to customize an insurance policy as per your requirements.
Types of insurance policies
The following types of life insurance plans in India are available:
- Term plan
- Whole life plan
- Endowment plan
- Money back plan
- Child’s plan
- Retirement plan
Term life insurance plan
A term life insurance plan as the name indicates will cover the life for a specific period only. It is the purest form of insurance plan ever launched in the insurance history.
- Simple – The terms and conditions of the plan are very simple and they can be understood by a layman also very easily.
- Low premium – The premium payable for a term insurance plan is very low.
- Very high coverage – You can get the highest coverage by buying a term insurance plan. The term plan can be considered as the cost-efficient plan.
- Death benefit – The policy offers death benefit in the event of the death of the policyholder. The beneficiary or nominee will get the financial benefit.
- Survival benefit – The term plan will not offer a survival benefit. If the policyholder is alive after the tenure, there will not be any financial benefit.
Term Plan with Return of Premiums (TROPS)
Term Plan with Return of Premiums
- Survival benefit – The terms and conditions of TROPS will be similar to the term plan. The only difference is that it will offer the survival benefit. If the policyholder outlives the policy term, the premiums paid by the policyholder will be returned.
- Expensive plan – The TROPS is an expensive plan. The insurance premium paid for TROPS is higher than a pure term insurance plan.
Whole life plan
- Covers whole life – The whole life insurance policy can be purchased to cover the whole life. There are plans to cover up to 100 years.
- Death benefit – The ‘sum assured’ which was agreed by the insurance company at the initial subscription will be paid to the beneficiary upon the death of the policyholder.
- Bonus facility – The death benefit will be paid to the nominee along with the accrued bonuses as well.
- Partial withdrawals – The whole life insurance policy facilitates partial withdrawal option after the completion of the policy premium payment term.
- Higher premiums – The premium charged for whole life insurance policy is higher than the term insurance plan.
- Financial benefit to legal heirs – Along with the lifelong coverage, the insurance plan offers a financial benefit to legal heirs.
The insurance and savings are mixed with the endowment plan.
- Investment portion – A certain amount of the premium will be allocated towards the investment.
- Maturity benefit – If the policyholder is alive after the policy term, the insurance company will make payment
- Bonus – The insurance policy comes with a profit-sharing option. The bonuses declared by the insurance company will be paid on annual basis or they will be accumulated and paid with the maturity amount.
- Death benefit – The main purchase of the life insurance policy is the protection of the policyholder. It will be fulfilled by offering the death benefit. If the policyholder dies during the policy term, the nominee will get the death benefit.
- Low risk – Even though endowment plans have the investment component, there is low risk with the investment.
- Long-term savings – The plan is ideal to fulfill your long-term savings options.
- Lump sum payout – Unlike money back insurance policy, the payout will be made lump sum at the end of the term. The payout will help in fulfilling your life goals such as children’s education and retirement, etc.
Money back life insurance plan
- The similarity with endowment – The money back life insurance product is similar to the endowment plan. With a money back policy, the payouts will be done at regular intervals. On the other hand, the payout will be done at the end of the term with an endowment plan.
- Bonus eligibility – The bonus declared by the insurance company will be paid for money back policyholders.
- Fulfills short-term needs – If there is a requirement to fulfill short-term financial needs, you will want to choose the money back life insurance product.
- Maturity benefit – There will be higher returns at the maturity date as various kinds of bonuses will be paid by the insurance company. Some of the bonuses include a terminal bonus and loyalty bonus.
The ‘Child Plan’will help you build the corpus for the child’s future. The plan can fulfill the expenditure on children’s education or marriage.
- Payouts – The plans are designed to deliver annual payouts or onetime payout after the child reaches 18 years of age.
- Death benefit – If the policyholder dies during the policy term, the immediate payout will be made to the beneficiary. As per the conditions of the policy, the payout will be distributed on annual basis as well.
- Future premiums waived off – Some insurance plans will waive off the future premiums in case of sudden demise of the parent or guardian. The policy will continue until the end of the term and it will deliver returns until the maturity date.
- Fulfillment of a child’s dream – You should buy a child plan to fulfill the dreams of your child.
The corpus for your retirement will be built with the help of the retirement plan offered by an insurance company.
- Financial independence – The retirement life insurance policy will give the financial independence.
- Annual or onetime payout – While subscribing to the insurance plan, you can opt for either annual payout or onetime payout after reaching 60 years.
- Death benefit – If there is an unfortunate death of the policyholder, the death benefit will be passed on to the nominee or beneficiary. The death benefit will be higher of the ‘sum assured’ or fund value or 105% of total premium paid.
- Long-term savings – The retirement plan will fulfill your long-term savings requirement in the best possible way.
- Vesting bonus – If the life assured survives the policy term, vesting bonus will be paid at the end of the term.
- Funding annuity – The final payout made after the maturity date will help in funding the annuity policy. You can buy a deferred annuity or immediate annuity as per your financial resources after the retirement.
The insurance, investment and income tax exemption are combined in a single product. ULIP (Unit-Linked Insurance Policy) will deliver market-linked returns so that there will be capital appreciation on a long-term basis.
- Premium – A part of the premium will be invested in various kinds of funds as per the risk appetite of the policyholder.
- Fund choice – The policyholder can exercise an option in the selection of the fund. There are equity funds, debt funds, liquid funds and hybrid funds offered by most of the insurance companies.
- Switching of funds – You can switch over from one fund to another fund in an effortless manner. The fund switching option will help you minimize the risk and maximize the returns.
- Flexible investment option – There is flexibility in investing in the ULIP. You can increase the premium as per the rise in salary and it can be reduced before reaching the retirement age.
- Income tax benefits – There will be income tax benefits on the premium, annual returns and the maturity payouts.
- Payouts – You can opt for regular payouts or a lump sum payout at the end of the term. All the payouts are tax-free in the hands of the investor.
- Death benefit – The nominee will get the highest payout as per the terms of the policy. The payout will be within the ‘sum assured’ or ‘fund value’ or ‘105% of all the premiums paid by the policyholder’.
- Premium payment waived off – If the policyholder dies during the term, the immediate payout will be made to the beneficiary. The policy will continue as the future premiums will be waived off by the insurance company. In addition to regular payouts, the final payout will be made at the end of the maturity date.
Women’s life insurance policies are specially designed to fulfill the needs of women at various life stages in a very efficient manner. Women running their own business and those who need a break from work due to various reasons (health issues) should be covered by a comprehensive life insurance product.
- Protection of life – The spouse’s premature death will be covered by the plan.
- Health – There are various kinds of women-specific health risks which are covered by the policy.
- Retirement – There will be great financial security after the retirement
- Child’s education – Some plans will take care of the future of children in paying the tuition fee and marriage expenses.
- Long-term savings & investment – The long-term savings and investment needs are fulfilled by the women’s policy.
- Pursue a career of her choice – If the sudden demise of the husband will lead to financial stress, it can be overcome by pursuing a career of her choice. The financial benefit awarded after the death of the husband will help her fulfill the family obligations in the best possible way.
Group insurance policies
There are group health insurance policies which can be subscribed to by employers on behalf of their employees. Employers will not take care of the welfare of their employees but will be able to fulfill a social obligation as well.
- Lowest premium – The premium paid for a group life insurance policy is very low
- No medical tests – The group members are not required to undergo the medical examination to subscribe to the plan
- Covers existing ailments – The group insurance policy covers existing health issues
- Term policy – The group term policy will deliver higher ‘sum assured’
- Cashless hospitalization – The policy allows cashless hospitalization at network hospitals
- Coverage of disability – There will be coverage of disability. If the employee fails to attend the work due to health issues, the insurance company will pay compensation as per the limits of the contract.
Selection of a life insurance policy
The selection of a life insurance policy will be done based on the requirements of the policyholder. The insurance policy should fulfill the financial goals (short-term and long-term) in a very efficient manner.
- Premium payment – The insurance premium should be paid on monthly/quarterly/semi-annually/annually as per the mode selected by the policyholder. If the payment is done on annual basis, there will be a discount on the insurance premium.
- Mode of payment – The insurance premium can be made in various ways. The salary deduction (applicable for employees), cheque, DD and online payment can be done as per your convenience.
- Renewal of the policy – There are insurance policies which are issued based on the onetime payment of premium. For other types of policies, the policy should be renewed before the due date. A grace period of 15 to 30 days is allowed as per the payment mode of the policy. The insurance contract will be null and void if the premium is not paid within the grace period.
- Revival of the policy – The insurance policy can be revived after paying the dues along with interest (if any) as per the terms and conditions of the policy. After the revival of the policy, full benefits will be restored to the policyholder.
There are varied types of life insurance policies offered by many insurance companies in India. You can settle for the best policy as per your short-term and long-term financial goals. The dependents’needs, as well as the policyholder’s needs, are fulfilled with the life insurance policy.