Term Insurance – This is pure insurance. Any amount is not returned to policyholder on maturity. The sum assured is paid only if the insured person dies in the policy period.
The premium is lowest among all types of insurance policies.
Endowment policy – In such policy sum assured is paid if the insured person dies during the tenure. In case the person survives on maturity of policy, the premium paid along with other investment returns and bonuses are paid to the insured.
Money back policy – A portion of the sum assured is paid out at regular intervals. If the policy holder survives the term, he gets the balance sum assured. In case the insured dies during the period of the policy, the beneficiary gets the full sum insured without the deduction of the money back amount given so far.
Unit Linked Insurance Plans (ULIPs) – ULIPs are plans that invest the policyholder’s premium in capital market. A part of the premium is used for insurance cover and rest is invested in market. Therefore the return is not fixed and there is a risk factor. ULIPs can invest in equity or debt market.
ULIPs provide the flexibility of choosing from a variety of fund options depending on the customers risk appetite. One can opt from aggressive funds (invested largely in the equity market with the objective of high capital appreciation) to conservative funds (invested in debt markets, cash, bank deposits and other instruments, with the aim of preserving capital while providing steady returns).
Whole life policy – Whole life policy covers the life of policyholder for his whole life. The term of policy is not defined and extends till the policyholder is alive.
He pays the premium until his death and on his death the sum assured is paid to his family.
Whole life policies are now combined with other products to fulfil a variety of needs such as retirement planning.
About Prateek Agarwal
I am Chartered Accountant by profession, practicing in Jaipur. I have interest in accounting and taxation field.