Last Updated: Tuesday, July 11, 2017

Types of Insurance Plans | Life Insurance Policy to buy

Various types of Life Insurance Policies;

Types of Insurance Plans | Life Insurance Policy to buy | term plans to buy

What is Term Insurance Plans?

Term insurance plan is a life insurance product offered by an insurance company that provides financial coverage to the policyholder for a specified period of time. In the event of the death of the insured person during the term of the policy, the death benefit is paid by the company to the beneficiary. Term plans are the simplest form of life insurance. They provide life coverage with no savings / profits component. They are the most affordable form of life insurance since premiums are cheaper as compared to other life insurance plans. Online life insurance plans provide pure risk coverage, which explains the lower premiums. A fixed amount of money - the sum insured - is paid to the beneficiaries if the policyholder expires on the policy mandate. If the policyholder survives, there is no refund.

What are Endowment Plans?
Endowment plans differ from term plans in an essential aspect, that is, a maturity benefit. Unlike the term plans that reimburse the insured amount, as well as profits, only in the event of a death or causality during the policy, the endowment funds provide the insured amount in both scenarios: death and survival. Endowment plans require higher fees / expenses - reflected in premiums - to pay the insured amount, as well as profits, in either scenario: death or maturity. Profits are subject to premiums invested in the equity and debt markets.

What are Unit linked insurance plans (ULIP)?

Insurance policies related to the unit or the ULIP are insurance policies that offer you the opportunity to create wealth while ensuring the safety of a life cover. In ULIP, a portion of your premium is dedicated to your Life Cover and the rest is allocated to a common money pool, called the fund, which invests in equity, debt or a combination of both. The returns on your investments depend on the performance of the fund chosen by you.
ULIPs differ from traditional plans; as the name suggests, ULIP's performance is market-linked i.e. a portion of your premium is invested in stock market and fluctuation in market may affect your return. In ULIP you can choose the allocation for investments in stock markets/debt funds. However the value of the investment portfolio is accounted for by the net asset value (NAV). To this end, there are many similarities between ULIPs and mutual funds. ULIPs differ in one area, they are a combination of investment and insurance, while mutual funds are a pure investment avenue.

What are Whole life insurance plans?
Whole life insurance, or whole of the life insurance referred to as "direct life" or "ordinary life", is a life insurance policy that is guaranteed to remain in effect for lifetime of the insured, provided that the required premiums are paid on the due date.

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