There is a common assumption that there are three types of life insurance policies but in fact in India we have a total of six types of life insurance policy.
Types of Life Insurance Policies in India
Term Life Insurance Plans
- Overview - A basic life insurance plan.
- Tenure - 5-30 years.
- Maturity benefits - No maturity benefits.
- Death benefits - Nominee is paid the sum assured if the policyholder dies during the tenure of the policy.
- Premium costs - Cheapest premium compared to other policies.
Endowment Policies
- Overview - It is a combination of protection and investment plan.
- Tenure - 10-35 years.
- Maturity benefits - Maturity benefits will be paid on survival.
- Death benefits - Nominee is paid the sum assured if the policyholder dies during the tenure of the policy including the bonuses accumulated.
- Premium costs - Higher premium costs.
Unit Linked Insurance Plans(ULIP)
- Overview - Unit-linked and participatory in nature, these are investment plus insurance policies.
- Tenure - 10-20 years.
- Maturity benefits - Maturity benefits will be paid on survival.
- Death benefits - Nominee is paid the sum assured if the policyholder dies during the tenure of the policy.
- Premium costs - Premiums are comparatively higher due to investment costs.
Money Back Policies
- Overview - It is a combination of protection and saving policies.
- Tenure - 5-25 years.
- Maturity benefits - On maturity, the policyholder is paid the premiums paid minus the administrative costs.
- Death benefits - Nominee is paid the sum assured if the policyholder dies during the tenure of the policy. Death benefits are exclusive of pay-outs.
- Premium costs - Affordable premiums.
Whole Life Policy
- Overview - It is a combination of protection and saving policies.
- Tenure - Whole life of the policy-holders. Mostly up to 100 years.
- Maturity benefits - Maturity benefits are typically paid when the policyholder. reaches a certain age between 80 years to 100 years.
- Death benefits - Nominee is paid the sum assured if the policyholder dies during the tenure of the policy.
- Premium costs - Higher premium cost.
Annuity/Pension Plans
- Overview - A traditional plan which is non-participatory in nature.
- Tenure - No fixed term.
- Maturity benefits - No maturity benefits but are entitled to regular pensions till the specified term.
- Death benefits - Return of investments on the policy offered on some policy in case of death of the policyholder.
- Premium costs - Premiums are moderately prices with several plans requiring one time payment.