Types of Life Insurance - Best Life Insurance Policy Options Available in India

Life insurance has long been regarded as a crucial financial resource. But few individuals are aware that there are various kinds of life insurance plans. These can all be useful in their own special ways. Some can be viewed as a retirement or investing tool, while others offer security to the family of the primary earner.

One of the most crucial prerequisites for a peaceful, stress-free existence is selecting the proper kind of life insurance coverage. A life insurance policy not only ensures that one's dependents will be taken care of even after they pass away, but it can also help one develop a sizeable corpus to meet their future financial objectives.

In India, there are numerous varieties of life insurance coverage. A person can select a life insurance policy in accordance with their particular needs. 

Here’s a list of the types of life insurance plans, together with their characteristics and advantages:

Term Life Insurance

The most widely used life insurance is term life insurance. If the policyholder passes away during the policy term, it provides a death benefit to the policy's beneficiaries. However, if the policyholder survives till the end of the policy term, the death benefit can’t be claimed.

The most economical life insurance policies are term policies. The high level of coverage provided at incredibly low premium prices is this plan's greatest distinguishing characteristic.

Term life insurance typically does not provide maturity benefits. However, some term plans also provide benefits at maturity, such as term plans with return of premiums (TROP) if the policyholder lives longer than the expiration of the policy term. A term plan's coverage can also be increased by selecting extra riders, such as Accidental Death Benefit or Child Support riders.

Whole Life Insurance Plan

Whole life insurance is a type of life insurance that provides protection until the policyholder's demise. Depending on your financial needs and risk tolerance, you can choose between participating and non-participating coverage under this policy. Even if the premiums for participating whole life insurance are higher in comparison, the policyholders receive dividend payments on a regular basis. A non-participating policy has reduced premium rates, but the policyholder typically cannot take advantage of monthly dividends.

Term Insurance with Return of Premium

The term life insurance with the premium plans is a term plan that offers benefits at the maturity of the policy. Under this, the individual can receive the entire premium amount that they have paid throughout the policy term. 

Endowment Insurance Plan

It is a specific kind of life insurance policy that serves as both life cover and a wealth creation plan. Even if no claim has been made, these plans seek to offer maturity benefits to the life insured in the form of a lump sum payout at the end of the policy term. It is the best kind of life insurance for people who want the most coverage and a significant savings component. Even as these plans provide their family with financial security, they also aid the policyholder in developing the habit of saving.

Retirement/Pension Plans

A retirement insurance plan is designed to give individuals stability and security for their finances once they retire. A reliable source of consistent income can be produced by investing in retirement plans. The plan will assist the individual in covering their post-retirement expenses if they keep investing until then. Throughout their working lives, people can consistently invest a set portion of their income. The money they have accrued over the years will be transformed into a monthly income stream when they retire. Death benefits are another aspect of retirement programmes. Therefore, if the policyholder dies while the insurance is in effect, the deceased's beneficiaries will get an assured sum.

Money Back Policy

A money back policy, one of the best life insurances, provides policyholders with survival benefits at regular intervals in the form of a portion of the total sum assured. The remaining portion of the sum assured is given to the policyholder after the policy reaches maturity. However, if the policyholder passes away during the period, their dependents will get the whole sum assured without any reductions.

Unit Linked Insurance Plans

It is a specific kind of life insurance programme that provides both investing and life insurance benefits. Some of the premiums are used to ensure insurance coverage; the remainder is invested in a variety of financial products, such as market-backed equity funds, debt funds, and other securities. Since investors can quickly swap their premiums between several funds, ULIPs are incredibly versatile financial products. Since their proceeds are excluded from LTCG (Long Term Capital Gains), they are also promoted as having an advantage over other market products in terms of tax benefits.

Group Life Insurance

Under a group life insurance policy, a group of people are covered by a single life insurance policy. Group insurance covers a minimum of 10 members.

For their employees and clients, employers, banks, corporations, and other homogeneous groups of people can purchase group life insurance plans. Banks and lending organisations desire to keep the debt off the borrowers' families after their death, despite the fact that employers would like to provide financial security to the relatives of their employees.

The group's management is given access to the policy, and it is always purchased in the group's name.

Child Insurance Policy

A child insurance plan is a savings and investment strategy which, in the event of the policyholder's passing, offers financial security for their child's future. It is perfect for ensuring that the child's future needs are met, even in the event that the policyholder is not there. Parents can make investments in the best kid insurance plans to cover the costs of their schooling, marriage, or any number of other financial objectives that the child may have.

Here’s how to select the right type of life insurance

• Be clear about the goal you have while choosing the life insurance plan.
• Before selecting a life insurance plan, be clear about the needs of your loved ones and your daily expenses.
• Select a plan with a suitable policy term that achieves your desired goals.
• There are various life insurance policies that offer the option of adding riders to the base plan.
• Before selecting the life insurance policy, the individual must check the claim settlement and solvency ratio of the company along with the exclusions of the plan.
• You can consult a financial advisor who can advise you on the best insurance plans.