Types of Life Insurance Plans
There are different life insurance plans, each offering unique benefits to the policyholder. Term insurance offers coverage for a specific period, while a whole life plan offers coverage for an entire life. ULIP plans give you 10 times the premium as life coverage along with wealth creation.
Below are the nine different types of life insurance plans available in the market:
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Term Insurance Plans
Term insurance plans are pure protection plans without saving options, unlike other life insurance policies. These plans offer financial protection to your family in case of your untimely demise. With term plans, you can get a higher sum assured at lower premiums for a specific duration.
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Term Insurance with Return of Premiums (TROP)
Term insurance with return of premium (TROP) is a type of term insurance plan that returns all the paid premiums upon the survival of the life insured for the entire policy term. TROP plans are good for individuals who want to secure their families but also desire a potential refund of the premium paid by them.
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Unit-linked Insurance Plans (ULIPs)
Unit-linked insurance plans are insurance plans that have an investment component linked with them, along with life cover. A part of the premium is dedicated to life cover, whereas the other is invested in market-linked funds by the insurer. Generally, in ULIP plans, the life cover available is 10 times the premium amount.
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Endowment Plans
Endowment plans are a type of life insurance plan that offers both death and savings benefits under the same policy. Under an endowment plan, if the policyholder passes away during the policy term, a lump sum death benefit will be payable to the nominee. If the policyholder survives the whole policy term, they will receive a saving benefit along with bonuses or interest (depending upon the plan).
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Money-back Plans
Money-back plans are a type of plan that offers payments at regular intervals from the sum assured to the customers, instead of providing a lump sum payment at the end of the policy term. Money-back plans are good for senior citizens as they require a regular income source.
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Whole Life Insurance
Whole life insurance is a type of life insurance policy that offers insurance coverage to the life insured for their whole life, depending upon the premiums paid. Upon the unfortunate demise of the policyholder, a death benefit as per the plan will be payable to the nominee.
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Group Life Insurance
Group life insurance is offered for a group of people such as corporations, NGOs, or people who do not have blood relations but work for the same organization. In group life insurance, a life cover is provided to the whole group which is later divided as per the number of individuals in the group.
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Child Insurance Plans
A child insurance plan offers a dual benefit to the parent and the child. In case of the unfortunate demise of a parent during the policy term, a sum assured will be payable to the nominee or second parent to meet the expenses of the child. A lump sum maturity benefit will be payable to the nominee upon the survival of the policy term.
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Retirement/Pension Plans
Retirement plans are designed to provide a hassle-free life after retirement. Under these plans, you can get a regular monthly income to live a post-retirement life without any worries, along with life cover. So that in case of the policyholder’s demise, a sum assured can be given to the nominee.
Key Features of the Best Life Insurance Policy
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Affordable Plans
Generally, life insurance plans are very affordable if you maintain a healthy lifestyle. A 1 Cr term life insurance plan for a healthy non-smoker male starts at just Rs. 500/- per month.
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Tax Benefit
Investing in a life insurance plan offers you tax benefits. You can claim tax benefits up to Rs 1.5 lakhs on the premiums paid under Section 80 (C) and Section 10 (10D) of the Income Tax Act, 1961.
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Death Benefit
All life insurance plans, whether ULIP or child insurance plans, offer assured death benefits to the nominee in case of the sudden demise of the life assured during the policy term.
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Maturity Benefits
Various life insurance plans offer you maturity benefits at the end of your policy tenure. You can use this amount to fulfill your financial goals.
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Flexible Policy Tenure
You can choose a policy tenure that best suits your requirements. Some individuals require coverage for a short duration while others may require it for a long duration.
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Flexible Sum Assured
Life insurance plans offer you a flexible sum assured as per your requirements. Everybody has different requirements and they can choose a suitable sum assured as per their needs.
Benefits of Purchasing Life Insurance Plans
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Financial Security
A life insurance plan offers financial safety to your loved ones. In case of your untimely death during the policy tenure, your family will receive the chosen sum assured.
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Peace of Mind
Buying a life insurance policy provides you with early peace of mind as your loved ones are financially covered even in your absence.
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Wealth Creation
A life insurance policy helps you create long-term wealth over a period. Life insurance plans including ULIPs and endowment plans are an ideal choice if you wish to create wealth.
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Source of Income
Some life insurance plans offer regular income to your loved ones to meet their expenses in case of your untimely death during the policy tenure.
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Choice of Premium Payment Mode
You have the option to choose your premium payment modes including yearly, half-yearly, quarterly, or monthly. You can choose the payment mode that best suits your pocket.
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Loan Repayment
You might have taken a loan to buy a home, or car or to meet some emergencies. A life insurance plan ensures that the burden of debt does not fall on your loved ones.
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Helps to Accomplish Financial Goals
Investing in a life insurance policy helps you fulfill your financial goals such as your child’s higher education, retirement planning, etc.
What are the Different Stages of Investing in a Life Insurance Policy?
An individual should invest in a life insurance policy at different stages of life including:
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Started Earning
You should invest in a pure-term insurance plan when you have just started earning. It is the most economical way to financially protect your loved ones.
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Getting Married
After marriage, your financial responsibilities increase. It’s better to invest in a spouse term plan after getting married so that both partners can be financially secure.
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Becoming a Parent
Along with happiness, your responsibilities also increase when you become a parent. A child insurance plan offers you dual benefits of protection and savings. It helps you save a lump sum amount to fulfill your financial responsibilities.
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Planning to Retire
Investing in retirement or a pension plan during your earning years helps you live a stress-free retirement life. It offers you a regular income during retirement so that you can easily carry out your expenses.
What are the Payout Options Available With Life Insurance Plans?
There are usually three payout options available with life insurance plans. Let’s understand each payout option in detail.
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Lump Sum
Under this payout option, a lump sum amount is paid to your family in case of your unfortunate death during the policy tenure.
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Regular Income
This payout option offers benefits in the form of regular income over a certain period. Benefits can be paid in the form of monthly, quarterly, half-yearly, or yearly income.
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Lump Sum + Regular Income
A part of benefits is paid as a lump sum amount while the rest amount is paid in the form of regular income or installments over a period.
Clearing Up Confusion: Common Myths About Life Insurance
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Myth: Life insurance is too expensive!
Fact: No, life insurance is not that expensive; the premium rates depend upon your age. If you buy life insurance at a younger age, you hardly have to pay Rs. 500/month.
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Myth: Life insurance is only for older people!
Fact: No, life insurance is not only for older people. In today’s environment, where life expectancy is lower, every individual must buy a life insurance policy.
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Myth: I don’t need life insurance, because my employer already provides it.
Fact: An employer life insurance policy is only effective until you are an employee with them, so it is very necessary to purchase a separate life insurance policy as well.
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Myth: I don’t need life insurance because I have enough savings.
Fact: Your savings might be enough, but the cost of medical treatment is getting higher every day. So it is very important to purchase life insurance at an early age.
Popular Life Insurance Riders
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Critical Illness Rider
Critical illness rider benefits policyholders in case they are diagnosed with any of the critical illnesses listed in the policy document. The rider pays out the critical illness sum assured and allows policyholders to concentrate on their treatments without worrying about finances.
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Accidental Death Benefit Rider
If the policyholder dies in an accident during the policy term, the rider benefits along with the sum assured will be paid to the beneficiary by the insurance company.
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Accidental and Total Permanent Disability Rider
This rider comes into force if the policyholder meets with an accident and is declared partially or permanently disabled. The rider pays the benefits to the policyholder to cover their income loss and meet their expenses.
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Accelerated Death Benefit Rider
If the policyholder is diagnosed with any life-threatening terminal illness such as leukemia, cancer, AIDS, etc., this rider will pay a part of the death benefit which can be used for the treatment of the policyholder.
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Waiver of Premium Rider
Under this rider, if the policyholder is unable to pay their premiums due to the loss of income because of any unfortunate accident, injury, or disability, then all future premiums will be waived, and the policy will continue without restrictions.
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Term Rider
Term rider pays a fixed or monthly income to the beneficiary in case of the policyholder’s demise. This rider offers extra coverage for death in addition to the base sum assured that is predetermined by the insurance company.
How To File A Life Insurance Claim?
Life insurance claims can be filed under two circumstances: upon the policyholder’s death or at the maturity of the plan.
An individual can file a life insurance claim through the following ways:
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By Visiting the Insurer’s Branch Office
To file a claim, you can visit the nearest branch office of the insurer along with the required documents. Once the claim is verified, the insurance company will release the amount.
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Through Website/Application
You can file a life insurance claim through the insurer’s website or mobile application. Submit the required documents and details online to get your claim amount.
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Through Call
You can call the customer service helpdesk of your insurer to file the life insurance claim.
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