Types of Life Insurance Policies Available in India

Types of Life Insurance Policies Available in India

Life Insurance policy – almost all of us have heard this term and are aware of its importance in life. A Life Insurance provides financial security (in the form of sum assured) to the family of insured in case of his/her untimely demise or other miss-happenings covered in the insurance contract.

Many people have understood the importance of a Life Insurance policy and that is the reason why this sector has emerged as one of the fastest-growing finance segment in India.

Although many of us are aware of the importance of Life Insurance, not everyone knows that there are multiple Types of Life Insurance Products Available in India and each of them comes with a variety of offerings.

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Life Insurance is a mutual contract between a policyholder and insurer/ insurance company, wherein the insurer guarantees the payment of a sum assured (also known as death benefit) to named beneficiaries of the insured in case of he/she dies. The sum assured is paid based on the premium paid by the insured and policy contract.

Types of Life Insurance Policies In India 2019

Life Insurance policy mainly has two basic types: term life policy and traditional whole life policy. In term life policy the policyholder pays a fixed amount of premium for a specific period whereas, in a whole life policy, the policyholder has to pay premiums till his/ her death.

List of Different types of insurance policies available in India: Risk & Benefits

Type of Insurance Risk Benefits
Term Insurance or Term Plan
  • No payout is provided to the insured or beneficiaries if the insured outlives the policy term
  • It is a pure death risk cover plan which offers high coverage or sum assured at low premiums
Whole Life Policy
  • If the insurance company changes their policies, goes bankrupt, or has some bad years, your return will be impacted negatively.
  • Investing a large amount of money in this single policy exposes you to a larger risk.
  • This policy covers whole life of the assured, or for up to 100 years in some cases.
  • This insurance policy also offers partial withdrawals on completion of certain premium payment term.
Endowment Plan
  • Protection is provided only for the specified period.
  • Premiums are usually much higher than a whole life or term insurance plans.
  • Many insurers do not provide the renewability facility for endowment policies.
  • Returns are usually low
  • If the assured outlives the term of the policy, the insurer offers the maturity benefit.
  • These plans may offer periodical bonuses (paid either on maturity of the policy or to the beneficiaries under death claim).
  • Endowment plans have surrender values, paid-up values, and loan values.
Unit Linked Insurance Plan
  • The returns cannot be guaranteed.
  • Returns are poor because a host of charges are associated with the scheme, such as administrative charges, mortality charges, and so on.
  • If the market does well, profits are good.
  • It provides mortality insurance cover.
  • ULIP investments are flexible, the policyholder can switch from one policy to another.
  • ULIP provides tax exemption benefits to the policyholders under section 80c.
  • Even the sum assured received by the nominee after the demise of the policyholder is tax free.
Money Back Policy
  • Tenure is very long (usually up to 20, 25, and 30 years).
  • Survival benefits paid at regular intervals during the policy’s tenure.
  • On maturity of the plan, the remaining part of the sum assured is paid (known as maturity benefit).
  • In case of death of the assured, insurer pays the entire Sum Assured to the beneficiaries.
Children’s Policy
  • Considering an additional charges such as premium allocation charges, and others, returns could be low return in the initial stage and lead to additional loss on leaving policy before tenure’s completion.
  • Helps in building the corpus for your child’s education and marriage.
  • Most child plans provide one time payout or annual instalments after the child turns 18.
  • Some child plans even waive off the payment of future premiums on demise of the life insured. The policy continues till policy’s maturity.
Annuity Plan/ Retirement Plan
  • Annuity plans are one of the most costly types of investments.
  • Most plans charge surrender penalty for early withdrawal
  • Guaranteed payout
  • Some annuity plans pay out a higher income than available standard annuities if during the occurrence of health issues.

 

HDFC Life Insurance

 

1. Term Insurance or Term Plan

Term insurance or term plan is a type of life insurance plan that provides coverage for a specific period. In case of demise of the insured during the policy tenure, the nominee receives death benefit (sum assured). If the policyholder survives the entire policy term, no payout will be provided.

These are the most basic and affordable form of Life Insurance. Term plans provide life cover with no profits/ savings component. The premiums are much cheaper in a term insurance than other Life Insurance plans.

List of Top selling Term plans Details:

Term Plan Name Policy Term Sum Assured  Annual Premium 
Max Life Online Term Plus 60 Year 98.30% 8300
ICICI Pru iProtect Smart 60 Year 97.90% 9700
Aegon Life I Term 60 Year 97.10% 7500

Note: The Quoted Price for an individual non-smoker 30-year person with sum assured of Rs.1 crore cover policy.

2. Whole Life Policy

This Type of Life Insurance Policy provides permanent life insurance. Whole life policy offers a savings component (also known as cash value), and lifelong protection cover as long as the insured pays premiums. Under this policy, beneficiaries receive a death benefit after the death of the insured person.

Unlike a term insurance, the policy is not defined in a whole life policy, so the policyholder can enjoy the life cover throughout his/her life. By paying regular premiums, the policyholder gets a complete life cover. The policyholder needs to pay regular premiums until he expires, and upon that total amount, the corpus is paid to his family. The whole life policy expires only when any eventuality occurs as there is no pre-defined tenure.

Some of the best whole life policies are :- Max Life Whole Life Super, SBI Life – Shubh Nivesh, and IDBI Federal Life Insurance Whole Life Savings Insurance Plan

3. Endowment Plan

It is a Life Insurance plan which not just covers the life of the insured, but also helps them save regularly for a specific time period so that they can get a lump sum amount on the maturity of the policy in case they survive the policy term.

An endowment plan is different from a term plan in terms of maturity benefit. Unlike a term plan, an endowment plan pays out the sum assured along with profits in case of an eventuality during the policy term as well as on survival of insured. The profits are the result of investing the premiums in the asset market. Another difference is, endowment plans come with higher fees and premiums for paying out sum assured with profits in both scenarios – death or maturity.

Some of the best endowment plans are :- LIC New Endowment Plan, Kotak Classic Endowment Policy, and HDFC Life Sampoorn Samridhi Plus.

 

 

4. Unit Linked Insurance Plan

A Unit Linked Insurance Plan (or ULIP) is a life insurance product which gives you both insurance as well as an investment with a single integrated plan. You can pay a premium on a monthly or annual basis. A portion of the premium goes towards life insurance whereas rest of the amount is invested in stock/debt market like mutual funds.

Unit Linked Insurance Plan (ULIP) is linked to markets and thus, it is a form of the traditional endowment plan in which the sum assured is paid on death/maturity. However, in ULIP, you have the liberty to choose the investments’ allocation in stock/debt markets and its value is captured by the net asset value (NAV). Also, ULIP is a combination of insurance and investment, whereas a mutual fund is a pure investment avenue.

Some of the best Unit Linked Insurance Plans are :- Aviva iGrowth, LIC Market Plus-I Growth Fund, Tata AIG Life Invest Assure II – Balanced Fund, and Aegon iMaximize.

5. Money Back Policy

This policy too is a form of the endowment plan, however, it gives periodic payments to the beneficiary over the policy term instead of providing a lump sum amount at the policy’s maturity. The insurer pays a portion of the sum assured at regular intervals. In case of policyholder’s death over the term of the policy, the full sum assured is given to the beneficiary. If the policyholders survive the policy term, they receive the balance sum assured.

Some of the best money back policies are :- SBI Life- Smart Money Back Gold, Bajaj Allianz cash Assure, and HDFC Life Super Income Plan.

6. Children’s Policy

Child plan or children’s policy is insurance plus investment plan which offers two crucial benefits – securing the future of policyholder’s children financially and financing the turning points in their life including higher education, marriage, and so on.

These policies can be obtained in the name of the policyholder’s child. It is beneficial only for the child and provides a financial assistance to the parents when their child reaches a particular age of his/ her life.

Some of the best children’s policies are :- Bajaj Allianz Young Assure, Max Life Shiksha Plus Super, and ICICI Pru Smart kid Assure Plan.

 7. Annuity Plan

An annuity plan is a long term insurance policy which helps to protect policyholders from the risk of outliving their income. Under this plan, your contribution (in terms of premiums) is converted into regular periodic payments after your retirement, that can last for life.

It is similar to a term insurance policy and aims at covering policyholder’s income loss. Post-retirement, the regular income source ceases to exist for an individual (mainly for private job holders) and it doesn’t take long to exhaust benefits like gratuity or provident funds. At that time, annuity plan provides regular income in the form of pension to the policyholder for safeguarding his/ her retirement. To enjoy financial freedom post-retirement, it is best to get an annuity plan.

Some of the best children’s policies are :– SBI Life – Annuity Plus, HDFC Life New Immediate Annuity Plan, and ICICI Pru Immediate Annuity.

 

Also Read: A Complete Guide to Ayushman Bharat – National Health Insurance Plan

 

These were some most popular types of Life Insurance policies in India. To know more about Life Insurance plans, visit mymoneymantra, a leading online financial services market place.

 

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