All of us are aware of the importance of life insurance policies, and we’ve decided to get them done at least at one point in our lives. But, there’s one problem that tops all these thoughts – which one to choose?
The availability of so many of these life insurance plans can sometimes be intimidating to choose from. Some might have explained to you about the maturity benefits, but someone might have also discussed the extended coverage for a better premium offer. Amidst all these crazy offers and products, people often end up on the wrong road.
Hence, we’re writing this article, to differentiate between the different kinds of life insurance policies that can help you choose the best one of yourself, without falling prey to others’ words.
Life insurance policy
Now, before we dig into the different types of life insurance policies, the beginners must understand what it is. It is primarily a contract that is signed between the individual and a life insurance company. You pay a nominal amount for specific years or for a lifetime (depends on the plan of choice) which is transferred to the nominee after the policy holder’s death—the term of tenure differs for different policies.
The different types of life insurance policies
- Term Plan A: This is a full live cover policy that follows a simple structure. You have to pay a premium amount for a specific number of years, and after the death of the policyholder, the discussed some ill reach the nominee. However, this does not accompany with a maturity benefit. But, it covers a higher-end sum, when compared to the other policies, for the minim or a lesser premium amount. A maturity benefit accompanies TROP, and no interest is paid on that.
- Whole life insurance: The name itself suggests that the policy is for the entire life the premium amount ought to be paid regularly, and a sum is paid after the death of the policyholder. Apart from this sum amount, it also ensures to pay an assured component. You have the capability of re-investing the cash amount or letting it grow, or can also gain a loan against the sing cash component, if the need be or during emergencies.
- Endowment policies: These plans are an amalgam of the savings and the protection premiums which are again scheduled for an only specific number of years and promises to pay the amount to the nominee after the policy holder’s death. Meanwhile, a lumpsum amount is received by the policyholder after the policies maturity.
- Moneyback policy: They again another amalgam of the savings and protection policies. One of the critical advantages is that a portion of the maturity amount is used or prided when the need be before the completion of the tenure. If the policyholder dies during this tenure, then the entire sum goes to the nominee.
- Unit linked Insurance plans: These types of plans are combinations of investment and insurances. They’re made in the form of equities and debts. Although there is no return from this plan, at the time of maturity, the policyholder is entitled to gain lumpsum money.