Types of Life Insurance Plans You Can Buy in India

If you are pondering over buying a life insurance plan in India, you will find multiple options. Certain types of life insurance plans offer death benefits, while other policies come with maturity benefits as well. Depending on your requirements, you can choose the plan that meets your needs.

Life insurance – Overview and types

You may want to understandwhat life insurance is. It is a contract with an insurance company that guarantees the financial security of the policyholder’s nominees in case of an unfortunate event. The life insurance policy can be active for a limited period or throughout the entire lifetime of the policyholder, depending on the plan.

There are various kinds of life insurancepolicies in India, and they offer a plethora of benefits. Here are some of the most important types:

  1. Term life insurance

A term life insurance is a plan that remains active for a fixed time. Thenominees of the policyholder get the financial benefits from the insurance company only in case of an untoward incident resulting in the policyholder’s absence. This is why it is known as a pure life policy. The beneficiaries receive the pay-out aslump sum, period payments, or a combination of both. The policy comes with a fixed premium and sum assured.

Some of its benefits are:

  • It offers a large payout in exchange for an affordable premium
  • It protects the financial goals of the nominees
  • It offers an annual tax deduction of up to INR 1.5 lakh under section 80C of the Income Tax Act, 1961
  • It lets you choose the duration, premium payment term, and cover of the policy
  1. Unit-Linked Insurance Plan (ULIP)

When it comes to the types of life insurance policies you can buy in India, ULIP is one of the best return-generating plans. It combines life insurance with an investment towards wealth buildup. A portion of the premium you pay finances the life insurance policy, and the insurer invests the balance amount in debt, equity, or a combination fund. Thus, apart from providing your nominees with financial security, a ULIP also provides attractive maturity benefits if you outlive the investment tenure.

Some of its benefits include:

  • It helps you meet long-term monetary goals, as your investment gets compounded
  • It offers you the flexibility to choose how to distribute your investment between equity and debt funds
  • It offers tax benefits under Section 80C and Section 10(10D)of the Income Tax Act, 1961
  1. Whole life insurance

This life insurance plan provides continuous coverage throughout the entire policy tenure. Apart from the benefit paid to your nominees in case of an unfortunate event, the policy also offers a maturity benefit. Additionally, this plan includes a cash value option, which increases over the policy period. You can withdraw it at any time or opt for a loan against ithowever, the nominees will receive a reduced death benefit if you fail to repay the loan, and an untoward incident occurs.

  1. Endowment policy

This type of life insurance policy has dual benefits of protection and savings. It offers monetary benefits to the nominees in case of an unfortunate event during the policy tenure. Moreover, you get the maturity benefits in case of survival.

  1. Money-back policy

This is a life policy that offers regular payments to the policyholder, known as ‘survival benefits’. The payments start after a specific period and continue until the policy’s maturity if the insured is alive. In case of an unfortunate event, the nominees get the entire financial benefit, irrespective of how much survival benefits were paid.

Choosing the right policy

If you only want to secure the financial future of your loved ones, buying a term insurance plan will help. However, if you wish to grow your investments along with ensuring financial stability, opt for a ULIP.

You can use an online life insurance premium calculator to shortlist and select the most suitable policy.

At Money Expert, we find out whether or not your job affects your life insurance coverage and what you can do to protect yourself from this risk.

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