The two subcategories of life insurance plans are those, which combine an investing component with insurance, and the pure risk coverage plan. You might not know which plan to choose, though. Or perhaps you need to be aware of the various kinds of life insurance plans on the market in order to make a good decision!
- Term Life Insurance
Term insurance offers protection against death risk for a predetermined time. The life insurance company pays the death benefit to the nominee in the event that the life assured passes away during the policy period. Pure risk coverage is provided under this low-cost, high-coverage plan.
- Unit Linked Plans (ULIPs)
A unit-linked plan combines insurance and investments in its entirety. Part of the ULIP premium is utilized as risk protection (insurance), and the other amount is invested in funds. Depending on the investor’s risk tolerance, the insurance firm offers a variety of funds. The insurance firm then invests the total sum in bonds, shares, loans, market funds, or hybrid funds on the capital market.
- Endowment Plans
Another sort of life insurance plan that combines savings and insurance is an endowment plan.
The life insurance business invests the remaining funds while keeping a fixed amount aside for life insurance. In an endowment plan, the insurance company offers the life guaranteed maturity benefit if he survives over the policy’s term. Additionally, Endowment Plans may periodically provide bonuses that are paid upon maturity or to the nominee in the event of a death claim. The nominee will get the death benefit in the event of death.
- Whole Life Insurance
Whole life insurance policies provide coverage for the life assured throughout their entire lives or, in some situations, up to age 100. Term plans, however, are for a specific period of time.
The coverage amount, or sum assured, is chosen at the time a policy is purchased, and it, together with any bonuses, is paid to the nominee upon a life-assured death claim.
A life insurance plans is essentially a promise to provide financial security for your loved ones in the case of your dying. However, a policy’s capacity to deliver on its guarantee depends on a few key elements:
- The death benefit is the amount that the life insurance plans company will pay upon the death of the insured person. This bonus is typically free from income taxes.
- The premium is the amount paid each month or annually to keep the insurance in effect.
- The recipient(s) of the death benefit is/are the beneficiaries. One person can receive it all (such as a surviving spouse), or it might be distributed proportionally among a few people (such as a husband receiving 50% and two adult children receiving 25% each). By the way, the beneficiary doesn’t have to be a person or blood-related; if you want, you can give all or a portion of your death benefit to an organization, such as a charitable organization.