What is Life Insurance?
Life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of an insured person
Types of Life Insurance Policies:
- Term Insurance: A term life insurance is a less expensive option compared to a permanent life insurance. Term Insurance, as the name suggests, is a life insurance policy that provides coverage to the insured for a certain time period. The death benefit is paid to the beneficiaries of the insured in case the insured dies during the policy’s term. In case the insured outlives the tenure of the policy, the policy terminates and you need to buy a new policy. Just like a permanent life insurance policy you need to pay the premium amount. Read More
- Whole Life Insurance Policy: Whole life insurance, also known as permanent or traditional life insurance, is an insurance agreement which remains active for the insured’s lifetime till the time premium amount is paid or till the date of the maturity of the agreement. The death benefit is paid to the beneficiaries in case of death of the insured.
- Endowment Policy: An endowment policy is a combination of both an insurance cover and a savings plan. It is a type of life insurance policy where the assured sum is paid in lump sum at the time of death of the insured or after a specific period of time.
- Money-Back Plan: A money back plan is basically an endowment plan with the benefit of liquidity. In this unlike the endowment plan, the insured gets the assured sum at regular intervals instead of getting it as a lump sum payment.
- Unit-Linked Insurance Plans (ULIPs): ULIPs are a combination of life insurance and the investments. It is a life insurance product where the policy holder can invest in investment options like stocks, bonds, or mutual funds. Both the investment and the protection part can be customized as per the needs and choices of the policy holder.
- Child Plan: A child plan is a tailor-made life insurance plan providing both investment and insurance options. It is an insurance plan where the child is insured. The premium is paid by the parents and the benefit is received by the child at the time of the maturity. It is popular among parents to fulfill the future dreams of their child like higher education, marriage etc.
- Pension Plan: A pension plan provides the benefits of both investment and insurance. It is a retirement plan wherein a certain amount is paid regularly towards the pension plan to ensure a steady flow of income once the insured retires. It is entitled for tax exemption under Section 80C.