Here are the main types of life insurance plans sold by insurance companies today -
1. Term Insurance Policy:
It pays a fixed sum of money to your family if you pass away while the policy coverage is active. Your family can use this money to settle any outstanding loans/liabilities, pay for their day-to-day expenses, etc.
2. Whole Life Insurance Policy:
It offers insurance coverage up to the age of 99/100 years and practically covers you for your entire life. As it is less likely you will survive such a long term, a Whole Life Plan is a sure-shot way of leaving a financial legacy for your loved ones when you are gone.
3. Child Insurance Policy:
It is a combination of insurance and investment plan that helps you save money systematically and build wealth for your child’s future needs. The plan will give you sufficient returns as well as protect your child in your absence.
4. Endowment Policy:
It offers a combination of insurance and savings, often providing guaranteed returns and financial protection to your family. It allows you to systematically invest in a low-risk instrument, and get a large sum after a set period of time.
5. Money-Back Policy:
It is a blend of both insurance and investment. The insurance part helps secure your family’s financial future and the investment part offers guaranteed returns at specific intervals. You get back a fixed percentage of the sum assured or the annual premium you’ve paid under the plan periodically, regardless of the market conditions.
6. United Linked Insurance Policy (ULIPs):
It is somewhat similar to a mutual fund that invests in market-linked investments, but also offers an insurance cover. A part of the premium you pay under a ULIP goes into providing a life insurance cover whereas the remaining premium is invested in several funds of the stock market that may yield high returns. The premium is invested in funds of your choice and preference.
7. Retirement Policy:
It helps you meet your financial requirements after retirement. Two main types of retirement plans sold by insurance companies include a Pension Accumulation Plan and an Annuity Plan.
a. A Pension Accumulation Plan can be linked or non-linked. A non-linked Pension Accumulation Plan works exactly like an Endowment Plan whereas a linked Pension Accumulation Plan works exactly like a Unit Linked Insurance Plan.
➔ Under a Non-Linked Pension Accumulation Plan, you are required to pay premiums for a specific period. When the policy matures, you will get a fixed amount of money that you can use for your needs and goals post-retirement.
➔ Under a Linked Pension Accumulation Plan, your savings will be invested in market-linked instruments and systematically get accumulated in a fund. When the policy matures, it will offer a lump sum amount that you can use for your retirement needs and goals.
b. Under an Annuity Plan, you need to make premium payment/s for a specific period, which will get accumulated into a fund. This fund will be converted into an annuity, i.e., a steady stream of income. You will start receiving this income periodically in your post-retirement years.