Types Of Insurance
The four most common types of Insurances that people buy are::
- Life Insurance
- Health Insurance
- Motor Insurance
- Home/Property Insurance
Life Insurance
If you are wondering what is life insurance meaning, you should know that a life insurance policy is a contract between an individual and an insurance provider, in which the insurance company gives financial protection to the policyholder in exchange for monthly fees (known as premiums).
As per the life insurance definition, the insurer (insurance company) pays a sum assured to the policyholder or to the named nominees in case the policyholder meets with an untimely demise in exchange for the premium payments made towards a life insurance policy.
Based on the arrangement, in the event of the death of the policyholder or, if the policy matures, the insurance provider shall pay the person or his family a lump sum amount after a certain amount of time. There are different types of life insurance policies to suit the individual needs and requirements of the policy buyers.
Understanding life insurance definition, its benefits and features are important before you buy one.
Let’s learn further and understand the specifics of different types of life insurance policies.
1. Term Life Insurance Plans
Term life insurance plans are the purest form of life insurance type as they offer life cover with no savings or profit elements. Term life insurance plans are the most affordable type of life insurance policy as premiums are relatively cheaper in comparison to other life insurance plans.
2. Unit linked insurance plan (ULIP)
One of the most unique life insurance types, a unit-linked insurance plan, is a thorough mixture of investment (market-linked returns) and insurance. As per the life insurance definition, the premium paid for the ULIP plan is partially used as a risk (insurance) cover and partially invested in different funds.
Depending on the policyholder’s risk tolerance, they can invest in different funds offered by the insurance provider. Then the insurance provider invests the collected amount into different money-market instruments such as shares and equities.
3. Endowment Plan
The endowment plan is a traditional type of life insurance policy that is a blend of insurance and savings.
With life insurance types such as an endowment plan, if the life assured live longer than the policy period, the insurance company provides maturity benefit to the policyholder. Additionally, some endowment plans may offer periodic bonuses that are either paid on maturity or to the beneficiary in case of the policyholder’s untimely death.
4. Money-Back
Money-back life insurance plans are unique types of life insurance policy in which a portion of the sum assured is paid back directly to the insured at regular intervals as a survival benefit. This way, the policyholder can achieve short-term financial objectives.
5. Whole Life Insurance
Whole life insurance plans are amongst the life insurance types that cover the life insured for a lifetime, or in a few cases, up to the age of 100 years.
At the time of purchasing a whole life insurance policy, the sum assured gets determined. During the purchase, a nominee is mentioned. In case of any unfortunate event, as per the whole life insurance definition, they get paid with the death claim and any bonuses, if applicable.
Nevertheless, if the life assured lives longer than 100 years, the insurance provider gives the life insured with a maturity benefit equal to the endowment corpus.
6. Child Plan
Child life insurance plans aim at building a corpus for the future development of a child. Typically, such life insurance types help in funding the education and marriage of a child.
Such plans provide instalments annually or in one lump sum pay-out, following the major milestones of a child’s life. In case the insured parent meets with an untimely death during the policy term – future premiums are waived off, and the policy benefits continue without disruption.
7. Retirement Plan
Retirement life insurance plans support building a stable financial source for an individual’s retirement years. The purpose and meaning of life insurance for retirement are to help one become financially independent and live without any worry.
Most retirement life insurance definitions fall under life insurance types that offer annual pay-out (by means of annuities) or a one-time lump sum pay-out (by means of commutation of the accumulated amount, up to the prescribed limits) on the completion of 60 years of age.
In case of an eventuality, within the policy term, the insurer pays the insurance benefit to your family.
Health Insurance
A health insurance policy serves as a financial cover for unforeseen medical expenses. With a health insurance policy, you and your insurance provider have an agreement that in the case of a medical emergency, the policyholder will be covered financially by the insurer. As with any kind of insurance, health insurance is an investment made over time with the goal of continuing your coverage in order to protect your hard-earned savings.
Insurance providers are mindful that there is no one size fits all, which is why there is not just one type of health insurance out there for every individual. There are actually several different kinds of health insurance plans in India to fit individual needs.
- Individual Health Insurance
- Family Floater Health Insurance
- Personal Accident Insurance
- Critical Illness Insurance
- Senior Citizen Plan