What we know about Life Insurance is just a tip of an ice-berg till now as we only know that it is a contract between company & customer where a company promises to pay a sum of money in exchange for a premium, upon the death of an insured person or after a set period. But that’s not all, do you know that Life Insurance is also divided into two categories:
One of the categories is Traditional Life Insurance which also has several categories in it which we are going to introduce to you down below:
- Whole Life Plan: Whole Life Plan is made to provide risk cover for the entire lifetime of the insured person (up to 100 years of age). You can also consider it as a savings component in which cash value may accumulate for your future legacy.
- Endowment Plan: Endowment plan is all about strict savings which forces you to do systematic & disciplined savings, providing a big amount of money in hand on maturity. These policies usually have a tenure of 5 to 30 years in which you get both death & maturity benefits.
- Money-Back Plan: Money-Back Plan pays you a fixed amount at certain policy milestones say 5th, 10th, 15th year providing triple benefit of death claim, money back & maturity. You can consider it as an Endowment plan with liquidity of funds. This policy is suitable for individuals who wish to save through an insurance plan and also maintain liquidity throughout.
- Term Plan: Term insurance is a type of insurance which is the replacement of Income earned by the breadwinner upon his death. Risk cover could be 10-12 times your annual income. It is the most affordable plan with guaranteed death benefits.
The second one of the categories is Non-Traditional Insurance which is complicated in terms and you have to be a financial market geek to know about this plan but we are here to tell you everything about Life Insurance, so a little bit of info is down there for you:
- ULIP (Unit Linked Insurance Plan): Unit Linked Insurance Plan are those insurance policies that offer the high potential of massive returns but in return, it also bears the risk of losses as this product is associated with the share market and its returns are purely based on the current status of share-market at the time of closure of the policy. It has a lock-in period of at least five years, meaning you can’t close the policy before this mentioned period.