As the breadwinner of your family, your family is dependent on your income. This income is utilised for household expenses, medical costs and other expenses that come along. If the case of an emergency, low income and low savings would not help you or your loved ones sail through it, especially, if the emergency happens in your absence.
It is imperative that you to provide a financial safety net to your loved ones from various life risks. One way that you easily do this is by investing in a good life insurance policy. There are types of life insurance policies that you can opt from. Read on to know more about them.
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What is a life insurance policy?
A life insurance policy is a type of policy in which the insurer compensates the dependents of the policyholder. This compensation is paid in the event of the policyholder’s untimely demise during the policy term. Depending on the type of plan you purchase, the compensation amount will depend on that. This compensation amount will help your family manage all the necessary expenses and have a financially secure life.
What are the types of life insurance plans?
There are types of life insurance policies available in the market for you to choose from. Each policy serves a different purpose. The following are the types of policies that you can select from:
1. Term insurance
In this policy, the insured gets financial protection for a specified term. For example, if the term of the policy is 25 years, the policyholder and their family would be protected by the policy for that many years. Once the policy tenure ends, the financial protection you get also ceases. If you, as the policyholder, were to pass away during the term of the policy, the insurer will compensate your family. However, if you survive the policy term, there are no maturity benefits at the end of the term.
2. Unit linked insurance plan (ULIP)
A ULIP is a policy in which the policyholder gets the dual benefits of investment and insurance. The premium that you pay for the policy is used for both. Hence, this policy is aimed at those who want to increase their savings by investing in equity and debt markets. When investing in this policy, it is advised to stay invested in it for a longer duration to enjoy compounded returns. In addition to investment, the policyholder gets an insurance cover from life risks.
3. Endowment plan
Endowment plans are similar to ULIPs. They also provide dual benefits of investment and insurance to the policyholder. The only major difference between ULIPs and endowment plans is that the returns in the latter are guaranteed. Whereas in ULIPs, these returns are subject to market risks and could vary.
4. Whole life insurance
A whole life insuranceplan financially protects you and your loved ones for the entire duration till you are alive. Term insurance provides protection only till a specific term. However, a whole life plan does not have any such specified limit. For example, if you buy this insurance and you were to live till the age of 89, the policy will provide financial coverage till that age. There is also a cash value component in this policy that keeps increasing every year. You also have the option of making partial withdrawals just like in ULIPs.
5. Group life insurance
This type of insurance is generally provided in workspaces by the employer to the employees. In this policy, the financial coverage is not limited to only for the employees butcan also be extended to the family of these employees. The range of organisations and the type of people who can be covered under this policy is extensive.
These are just a handful of life insurance plans that you should be aware of. If you are interested in knowing about types of plans, you can check the website of your preferred insurer. Similarly, if you want to buy a policy, you can use the life insurance premium calculatorto see how much your policy would cost you.