Life insurance policies are the safest and the most secure options to safeguard your family from financial contingencies that might arise in the future. Under such a policy, the insurer assures to pay a certain amount of money to the family of the insured in the case of his demise during the term of the policy.
A fundamental understanding of Life Insurance offered by Life Insurance Companies:
In short, life insurance can be called as an agreement between the life insurance companies and the insured or policyholder, wherein the former agrees to pay an assured sum of money to the nominated person of the latter in the case of the latter’s demise during the term of the policy. In exchange, the policyholder agrees to pay a certain sum of money on a regular basis in the form of premium or as lump sum money. The payment can be triggered to the benefit of the policyholder in the case of any unexpected illness or accident if the same is specified in the policy document. Even other expenses like the funeral expenses of the policyholder can be a part of the policy.
Type of Insurance Policies and their Features:
Before shopping for Life insurance policies, it is better to get a fundamental understanding of the types of life insurance policies:
- Term life insurance: Under the term life insurance policy, the insurance company will offer monetary coverage to the policyholder for a specific period.
- Whole life policy: Under this type of policy, the insured will continue to pay a certain sum of money as premium on a regular basis, until his death, after which the corpus is paid to the nominee.
- Endowment policy: This type of coverage will pay the insured/his family in both instances, which means both death and survival
- Unit linked insurance policy: Popularly called as ULIP, Life insurance policies coming under this type besides providing life cover to the insured will also offer him with investment options.
- Money back policy: This is not just an insurance policy, but also an investment plan, where the insured will get a periodic percentage of the sum assured as return and this policy will also cover the family against the death of the insured.
- Child insurance: Parents these days are facing a whole lot of financial trouble due to increasing educational expenses. So, they show interest towards investing on a child insurance plan to provide a secure life to the kid/s on their sudden death. Here, the beneficiary (i.e.) the child will get a lump sum amount on the demise of the policyholder.
- Pension plans: This type of coverage is for individuals to ensure a certain sum of money on their retirement. It will help him to lead a tension-free life after retirement. On the death of the policyholder, the nominee can get the sum assured either as lump sum money or as monthly returns as pension for the rest of the policy period.
Among these types of life insurance policies, the whole life insurance and term insurance are highly popular.