A life insurance policy is a contract with an insurance company. In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured’s death.
Typically, life insurance is chosen based on the needs and goals of the owner. Term life insurance generally provides protection for a set period of time, while permanent insurance, such as whole and universal life, provides lifetime coverage. It’s important to note that death benefits from all types of life insurance are generally income tax-free.1
There are many varieties of life insurance. Some of the more common types are discussed below.
- Term Life Insurance
- Whole Life Policy
- Endowment Plans
- Unit Linked Insurance Plans
- Money Back Policy
Term Life Insurance
Term life insurance is designed to provide financial protection for a specific period of time, such as 10 or 20 years. With traditional term insurance, the premium payment amount stays the same for the coverage period you select. After that period, policies may offer continued coverage, usually at a substantially higher premium payment rate. Term life insurance is generally less expensive than permanent life insurance.
Needs it helps meet: Term life insurance proceeds can be used to replace lost potential income during working years. This can provide a safety net for your beneficiaries and can also help ensure the family’s financial goals will still be met—goals like paying off a mortgage, keeping a business running, and paying for college.
It’s important to note that, although term life can be used to replace lost potential income, life insurance benefits are paid at one time in a lump sum, not in regular payments like paychecks.
Whole Life Policy
Whole life insurance is a type of permanent life insurance designed to provide lifetime coverage. Because of the lifetime coverage period, whole life usually has higher premium payments than term life. Policy premium payments are typically fixed, and, unlike term, whole life has a cash value, which functions as a savings component and may accumulate tax-deferred over time.
Needs it helps meet: Whole life can be used as an estate planning tool to help preserve the wealth you plan to transfer to your beneficiaries.
Endowment plans differ from term plans in one critical aspect i.e. maturity benefit. Unlike term plans which pay out the sum assured, along with profits, only in case of an eventuality over the policy term, endowment planspay out the sum assured under both scenarios death and survival. However, endowment plans charge higher fees / expenses reflected in premiums for paying out sum assured, along with profits, in either scenario death or maturity. The profits are an outcome of premiums being invested in asset markets equities and debt.
Unit Linked Insurance Plans
ULIPs are a variant of the traditional endowment plan.They pay out the sum assured (or the investment portfolio if its higher) on death/maturity.
ULIPs differ from traditional endowment plans in certain areas. As the name suggests, performance of ULIP is linked to markets. Individuals can choose the allocation for investments in stock/debt markets. The value of the investment portfolio is captured by the NAV (net asset value).
To that end, there are many similarities between ULIPs and mutual funds. ULIPs differ in one area, they are a combination of investment and insurance, while mutual funds are a pure investment avenue
Money Back Policy
A money back policy is a variant of the endowment plan. It gives periodic payments over the policy term. To that end, a portion of the sum assured is paid out at regular intervals. If the policy holder survives the term, he gets the balance sum assured. In case of death over the policy term, the beneficiary gets the full sum assured.
List of Term Insurance Plans
- LIC Anmol Jeevan II
- LIC Amulya Jeevan II
- LIC e Term Policy
List of Endowment Insurance Plans
- LIC Single Premium Endowment Plan
- LIC New Endowment Plan
- LIC New Jeevan Anand
- LIC Jeevan Rakshak
- Lic Limited Premium Endowment
- LIC Jeevan Sangam plan no 831
- LIC Jeevan Lakshya Plan no 833
List of India Child Insurance Plans
- New Children Money Back Policy
List of Money Back Insurance Plans
- LIC NEW MONEY BACK PLAN – 20 YEARS
- LIC NEW MONEY BACK PLAN – 25 YEARS
- LIC NEW BIMA BACHAT
- LIC JEEVAN SHAGUN
- Lic Jeevan Tarun Policy 834
List of Pension Plans
- LIC Jeevan Akshay-VI
- LIC New Jeevan Nidhi
- Varishtha Pension Bima Yojana
List of Health Insurance
- LIC JEEVAN AROGYA