Types of Life Insurance Policies in India
There are five basic types of life insurance policies available in India to meet your individual needs.
Term Life Insurance -
Term life insurance policy is the most basic type of life insurance available and is also probably the cheapest if bought early on in life. A typical term life cover provides your nominee(s) a pre-determined sum of money in the event of death of the insured, while no moneys are payable in the event of survival upto maturity of the policy. This type of insurance is available for a fixed tenure, usually upto a maximum of 25 years depending on your age when buying the cover. You pay a level premium over a period of time called the Premium Paying Period.
Whole Life Insurance -
Whole life Policy is intended to provide protection and / or a savings benefit to your dependents. In this type of cover, on death of the policyholder the nominee(s) / policyholder gets an assured sum of money plus an additional sum of money based on the returns earned by the insurance company on the invested portion of the premiums paid by the holder (this is available based on the type of policy purchased - with participation or without participation). The policyholder pays a fixed premium over the tenure of the contract.
Endowment Insurance -
Endowment Policy is intended to provide protection and a savings benefit on maturity. In this type of cover, in the event of death the nominees get a sum equal to the sum assured plus the accumulated cash value of the policy. In the event of survival till the policy maturity, the policyholder gets a lump sum amount based on the returns earned by the insurer on the invested part of the premiums received. These policies are for a fixed tenure, usually up to 25 years and the policy holder pays a fixed premium periodically during the paying period.
Money Back Policy -
Money-Back Policy, a variation of the endowment policy actually, is intended to provide protection and a periodic benefit to meet certain planned expenses. In this type of cover, in the event of death the nominees get a sum equal to the sum assured plus the accumulated cash value of the policy. In the event of survival, the policyholder gets a lump sum amount periodically and can use these amounts to meet planned expenses. These policies are for a fixed tenure, usually up to 25 years and the policyholder pays a fixed premium periodically during the paying period.
Pension Plan -
In addition to life insurance policies, some of the insurance companies also offer the Pension Plan - which is a product that allows you to plan for a recurring income to meet your expenses after your retirement. Under this plan, typically you pay a premium over a specified period. Upon maturity of the policy, you receive a sum of up to 25% of the cash value of the policy as immediate income, while the remaining value can be invested in an investment fund that pays out a sum of money regularly (the periodicity can be chosen by you - monthly, quarterly, half-yearly or annually) to you. This sum can be paid out perpetually (i.e. till death) or for a fixed period depending on the options chosen by you.
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