Many types of Life Insurance Policy - Pdf file
Life insurance has traditionally been regarded as a vital component of a sound financial plan.
However, there are many different kinds of life insurance packages available, but not many individuals are aware of this fact.
In their own special ways, each of these can be of assistance to a person.
Some of these plans safeguard the family of the primary wage earner, while others can be viewed as an investment or as a source of income during retirement.
So that you may select the policy that is most appropriate for your needs, the following is a rundown of the various kinds of life insurance policies along with the features and benefits associated with each:
1. Term Insurance Plans
Term insurance safeguards your family's financial future in the event of your death.
A term plan, which is designed to provide financial protection in a straightforward and cost-effective manner, is an essential component of the financial plan for the principal wage earner of a family.
Term insurance is a pure protection plan that is unlinked to the market.
Moreover, the premiums for term insurance are lower than those for all other types of life insurance.
Additionally, the premiums are more inexpensive if purchased earlier in life.
The term plan should be a priority for you as soon as you begin earning money, according to many experts.
There are several uses for term insurance.
Your family can utilize the insurance coverage to pay for day-to-day expenses, education costs, and wedding costs if you lose your income.
Your family can pay off any outstanding debts, such as a mortgage, car loan, etc., using the insurance proceeds.
Some term plans also provide riders, such as critical sickness coverage (which provides a lump sum for the treatment of specified critical illnesses) and accidental death benefit+ (paid over and above the amount assured if someone passes away in an accident).
These riders can provide you and your family with additional security for a minimal premium increase.
Let's explain by way of an example.
Rahul, age 30 years, needs a 1 crore term insurance policy until age 60 years.
He purchases a Term Insurance Plan with a ₹ 9,450 annual premium, a premium-paying term of 35 years, and the regular income payment option.
In addition, he purchases accidental death coverage of ₹ 50 lakhs (premium: ₹ 3,550) and critical sickness coverage of 50 lakhs (premium: ₹ 7,660).
For Rahul, the total premium for this full package, inclusive of all taxes, comes to less than ₹ 63 per day or ₹ 20660 per year.
2. ULIPs – Unit Linked Insurance Plans
A unit-linked insurance plan, sometimes known as a ULIP, brings together the worlds of investing and insurance.
Your family is financially protected by a ULIP. Additionally, systematic investments with market-linked returns can help you build wealth.
A ULIP lets you invest in several funds depending on your risk tolerance.
ULIPs have a 5-year lock-in period and can be invested in bonds, stocks, hybrid funds, etc. Bonds are safer investments.
If you're willing to take more risk, hybrid funds and equities may yield higher returns.
Since everyone is different, ULIPs offer significant investing flexibility.
Your risk tolerance and investment preferences may alter with age. You can evaluate these issues and adjust your investment plan using ULIPs.
Partial withdrawals and fund changes are also possible with ULIPs.
They give loyalty bonuses and wealth boosters to help you build riches.
Under Section 10(10D) of the Income Tax Act of 1961, ULIP maturity amounts are tax-free.
Let's illustrate.
Ritesh, a 30-year-old man, bought a ULIP Plan with a 20-year duration.
For 20 years, he paid 5000 every month. ₹ 3.6 lakhs was the plan's life cover.
Ritesh's returns will depend on his funds' performance.
At 4% and 8% returns, the maturity benefit would be ₹ 9.05 lakhs and ₹ 13.9 lakhs, respectively.
If Ritesh dies, his nominee will receive a lump sum death benefit.
You'll get the greater Assured Benefit or fund value at maturity.
The Assured Benefit is 101% of the total premium paid only at policy maturity.
3. Endowment Insurance Plans
Endowment plans are perfect for those who desire assured earnings and life insurance coverage.
An endowment plan is a life insurance policy that provides life coverage and a regular savings option.
This allows you to get a lump sum upon the policy's maturity.
In the event of your death during the term of the policy, your nominee(s) will also receive a death benefit.
In the same way that ULIPs are flexible, so are endowment plans.
You can select an appropriate payment method and timetable for the premium.
Endowment plans also offer the opportunity to get bonuses, which are paid in addition to the policy's sum assured.
In accordance with Section 10(10D) of the Income Tax Act of 1961, the returns earned at maturity from an endowment plan are tax-exempt*. Section 80C* of the same Act allows a deduction for premiums paid.
Let's clarify by using an example.
Manish, age 35 years, purchases an Endowment Insurance Plan with a 20-years policy term and a 10-years premium-paying term.
He pays ₹ 30,000 years in premiums and has ₹ 3 lahks in coverage. At a return of 8%, the maturity benefit would amount to ₹ 7.21 lakhs.
At a rate of return of 4%, his estimated maturity benefit, inclusive of guaranteed additions and terminal bonus, will amount to ₹ 4,47 lakhs.
4. Permanent Life Insurance
A whole life insurance plan is a life insurance policy that provides 99 years of protection.
The long coverage period of these plans makes sure that your family will be protected for a long time, unlike other policies whose terms are only 10 to 30 years.
Whole life insurance provides coverage for up to 99 years, making it ideal for those with financial dependents even in old age.
The greatest benefit of this product is that, in addition to providing lifelong protection for the insured, it also makes it easy for them to leave a legacy for their children.
Whole insurance plans provide substantial stability.
Five years of premium payments result in a guaranteed income at maturity.
In addition, under Section 10(10D) of the Income Tax Act of 1961, the income received from a whole life insurance policy is tax-free*.
Those who wish to leave a financial legacy to their legal heirs should purchase a whole life insurance policy.
If the policyholder dies during the policy's term, the policy's benefits, including a bonus for the total premiums paid, go to the beneficiary.
Let's understand by way of illustration.
Badrinath, age 35 years, invests ₹ 1,000,000 per year for ten years in the Lifelong Plan, with a policy term of 64 years.
Badrinath pays ₹ 10 lakhs as premium and is eligible to receive ₹ 1.5 crores at age 50 years.
After this, he will continue to earn a guaranteed income and cash bonus each year until the insurance matures.
At maturity, he will receive the remaining income in one lump sum.
However, it is essential to note that the annual amounts collected will depend on the rate of return and the insurer's future performance.
5. Money-Back Insurance
Money back life insurance policies pay a percentage of the sum assured at regular intervals.
Money back plans reward regular savers.
Money back plans are endowments with systematic payouts and increased liquidity.
Money back plans help you achieve short-term financial goals. Money returned can increase monthly or annual earnings.
Regular tax-free payouts under Section 10(10D)* of the Income Tax Act of 1961 make investing rewarding.
The policy benefits you immediately.
The Money Back Insurance Plan pays you regularly after your premium payment term end.
Once money-back plans mature. You receive a lump sum at maturity to guarantee your future or meet your family's goals.
A money back plan's insurance component helps reduce stress. Even without you, such plans protect your family's finances.
Thus, a money back policy provides complete family protection.
Your family will receive a lump sum if something bad happens during the policy term.
If you survive, you can receive a lump sum and regular payments.
Money back plan returns are tax-free* under Section 10 (10D) of the 1961 Income Tax Act.
Money back plans offer flexibility in premium payments.
Example.
35-year-old corporate employee Anshul had a boy recently.
He understands his educational responsibilities and wants to protect his son's future.
Considering these needs, he buys the Cash Advantage Plan with a 10-years premium term and a ₹ 50,000-rupee yearly premium.
His policy provides a fixed cash benefit of ₹ 30,447 each year, a maturity benefit of ₹ 2.64 lakhs, and bonuses of ₹ 1.08 lakhs (at 4% return) for his son's schooling.
Anshul can get a 20-years life cover of ₹ 5 lakhs.
6. Child Insurance Policies
Children deserve the best, and child insurance helps establish a nest egg for their future.
A child plan is one of the most essential instruments for financial planning for parents.
These programs can help you save a substantial sum for your child's schooling and wedding costs.
After the child turns 18 years, a child plan gives maturity benefits in the form of annual installments or a lump-sum payment.
In addition, there is insurance coverage for the parent.
Protection is a vital component of a child's plan because the parent pays the premium.
In the tragic event that the insured parent dies during the term of the policy, kid plans can provide prompt reimbursement to cover the child's expenses.
The ability to choose how and where to invest your money is one of the most significant characteristics of a retirement plan.
Your premium is invested in the equities, debt, or balanced funds of your choosing.
ULIP child plans also ensure that your earnings are sufficient to counteract inflation over time.
Unlike fixed return investments, which frequently fail to keep up with inflation, child plans leave sufficient room for rising costs.
Additionally, you can invest in a variety of funds and swap between them without worrying about their tax* implications. ULIP plans for children give double tax savings.
This includes advantages on premiums paid under Section 80C* and the proceeds upon maturity under Section 10(10D) of the Income Tax Act of 1961, subject to the criteria set forth therein.
In addition to loyalty bonuses and wealth boosters, child plans offer further savings.
Moreover, depending on your ability, you can either pay regular premiums or a single payment.
You can also use these plans as an emergency fund and withdraw your money once five policy years have passed.
Last but not least, child insurance lets you obtain broader coverage with benefits for critical illness and accidental death.
Let's understand by way of illustration.
Samyak, a new Father of 30 years, purchases the Child Insurance Policies for her daughter.
She selects a monthly premium of ₹ 5,000 and a policy duration of 18 years.
With a projected return of 8%, she will have ₹ 24,16 lakhs in 18 years.
Similarly, assuming a 4% rate of return over 18 years, she will receive ₹ 15,83 lakhs.
7. Retirement Insurance Plans
Retirement plans are designed to help you develop a significant corpus for your post-retirement days.
They assist you in achieving financial independence during your retirement years.
A retirement plan enables you to save and invest for the long term, so providing the opportunity to amass substantial wealth.
By investing in retirement plans that offer insurance benefits, you can also protect the financial stability of your loved ones.
Plans for retirement provide the potential for increased returns.
This is done through a combination of equity and debt investments.
In addition, the money you get at maturity is tax-free* per Section 10(10D) of the Income Tax Act of 1961.
In addition to allowing tax-free transfers between funds, retirement plans also permit tax-free transfers between accounts.
Lastly, retirement plans provide numerous withdrawal options, including a regular income, a lump sum, or a mix of the two.
Let's understand by way of illustration.
IT Professional Jatin, age 35 years, purchases Retirement Insurance Plan with the usual premium option.
The policy duration is 30 years with a 10-year premium payment term.
His guaranteed benefit is ₹ 10.10 lakhs for an annual premium of ₹ 1 lakh.
Jatin chooses a simple balanced portfolio for retirement.
With a 4% return, Jatin's retirement fund could reach ₹ 19.62 lakhs and earn ₹ 97 thousand annually.
Conclusion
Since you are now more aware of the various options available for life insurance policies.
You are in a better position to choose the policy that will serve the needs of both you and your family in the best possible manner.
Here on this page, ICICI Prudential Life Insurance provides information regarding the many various kinds of online life insurance products that are available.
This can be put toward increasing the value of your coverage and providing you with additional advantages.
Even though it is not guaranteed, Guardian has provided its qualified whole-life policyholders with a payout each and every year since 1868.
