Life insurance is a great tool to protect our loved ones from life’s uncertainties. But most people opting for life insurance still go for term insurance, when there are several other types of life insurance available to them in India. According to news reports, there are 327 million life insurance policies that are in force as of March 2022 for a total population of 1.4 billion. The value proposition is clearly not balanced. Another pertinent factor is that Indians are pegged to have less than 10% of mandatory financial protection against mortality.
A different type of life insurance may be more beneficial to you than the one you currently have. Each of these can be helpful in its own unique way; some provide protection while others act as a retirement tool. To fully understand the various types of life insurance and what works for you, we need to deep dive into the subject. Here are the different kinds of life insurance available to you in India:
Term Life Insurance
The name says it all. Term life insurance offers coverage for a limited amount of time, say 10 years, 20 years, 30 years and so on. If the policyholder dies during the insured period then their beneficiary would receive a payout. This type of life insurance is ideal for sole breadwinners of the family, allowing their dependents financial freedom after they’ve died. Unlike other types of life insurance policies, term life insurance does not offer maturity benefits, making it cheaper than other policies.
Whole Life Insurance
One of the simplest of life insurance policies, Whole life insurance offers you coverage throughout your life, up to 100 years of age. Unlike term life insurance, whole life insurance protects you for your entire life and on your demise gives your beneficiary a payout. If you are the sole breadwinner in your family or have dependants who are mostly senior citizens, this life insurance is ideal for you. The payout would give your loved ones a financial safety net.
Universal Life Insurance
Universal life insurance is very similar to whole life insurance in most regards, except for one fundamental difference - flexible premiums. This type of policy offers cash value and lifetime coverage much like whole life insurance but in universal life insurance you can raise or lower your premium amount according to your convenience, within the limits of the policy. However, you would have to pay higher premiums in the later years of your life. It would be beneficial to you in case of possible life scenarios such as business loss, a new child or job relocation.
Group Life Insurance
Group life insurance covers a group of people under one master policy. It is generally part of an employee benefits package or a member organisation package. The main advantage of this type of insurance is to give the family of the deceased employee a financial compensation. One of the biggest advantages of group life insurance is that it helps employees with health issues gain coverage.
Pro tip: Find out if your policy is portable, which means when you exit your organisation you take your coverage with you.
Variable Life Insurance
Variable life insurance is popular among the new generation as it amalgamates traditional life insurance with insurance options. It lets you invest a piece of your premium amount in an array of investment funds. You decide everything - the amount of premium, the investment fund you want to invest in and the sum assured for your family’s protection. You are in the driving seat and this key factor makes variable life insurance different from all other types of insurance.
Endowment Life Insurance
Endowment life insurance provides one with the benefit of life cover and savings. With a life cover, this plan allows you to save money regularly over a period of time so you get a lump sum amount on maturity. If the policyholder dies during the plan’s term, the beneficiary receives a death payout. This type of life insurance is great for people who want guaranteed returns with the security of life insurance.
Child Insurance Plans
A child insurance plan is a combination of investment and insurance plans that help you build your child’s future. This plan is a great financial planning tool for parents wanting to secure their child’s education and marriage expenses. It offers maturity benefits either in the form of annual instalments or as a one-time payout when the child turns 18. It also allows you the freedom to choose how and where your money is invested.
Conclusion
After learning about different types of life insurance you can make an informed and educated decision that will serve you better in the long run. Choose a plan that works for you and your family, giving you the most control over your finances.
