Types of life insurance policies: Which one must you buy?

One of the most basic investments which are advised by every financial expert is a life insurance policy. But the challenge is that there are too many types of life insurance policies and sieving through them to find the right one for yourself is a task. In this article, we will take a look at some of the most popular life insurance policy. Further, we will also discuss the various benefit and perks which come with them so you can make an informed and the best decision for yourself.

Some of the life insurances which we will be elaborating on are:

• Term plan
• Whole life insurance policy
• Endowment policies

Term Plan:

Known to be one of the simplest of all life insurance policies, a term insurance policy is a pure life cover. In this policy, you pay a premium to an insurance company. This is paid for a specific duration. In return, in the light of untimely event such as death, your family will receive the sum assured by the insurer. However, unlike most life insurance policies, term plan does not come with any maturity benefit.

Here are some of the benefits of term plan:

• More cover with fewer premiums as compared to the other life insurance products.
• The Term Plan with Return of Premium aka TROP comes with a maturity benefit. This is the sum total of all premiums paid till the maturity. Here, no interest amount is paid.

Whole Life Insurance Policy:

This the name suggests, a whole life insurance policy offers you a cover for a lifetime. Once you start paying the premiums regularly, the insurer will pay the sum assured to the nominee. This will happen only in case of an unfortunate event such as the death of the policyholder. Along with the sum assured, this life insurance policy also offers a saving component. 

Some of the benefits of Whole Life Insurance Policy include:

• Whole life insurance policy does not have a defined term.
• Nominee/s receive the sum assured upon the death of the policyholder.
• The saving component lets you re-invest and allows you to create a substantial financial corpus.
• You can also avail a loan against the saving component.

Endowment Policies:

This life insurance policy is predominantly a combination of savings and protection. If you pay your premiums as scheduled for a specific number of years, the nominee is eligible to receive a specified sum. Generally, such sum assured is paid in case of the untimely death of the policyholder. However, unlike in many life insurances, if the policyholder happens to survive the policy term, they will receive a lump sum pay-out as a benefit at the time of maturity. 

Here are some benefits of Endowment Policies:

• This policy allows the policyholder to make goal-based savings.
• You can avail of a loan against it in case of financial emergencies.
• It also offers a saving component.

The life insurance policy offers many combinations of benefits to suit your lifestyle. Before you zero down on one policy ensure that you pick the best for your family members.