There are 2 basic types of life insurance:
Pure Protection
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Protection + Savings
PURE PROTECTION
Term Plans:
are also known as Pure Protection plans. These plans are the cheapest form of life insurance and provide life cover for a specific period of time. In the unfortunate event of the death of the Life Assured during the Policy Term, the Insurer pays the Life Cover (death benefit) to the Nominee. Term plans are designed purely to protect your family’s future.
Example: Mr. Kumar and Mr. Kapoor bought term plans in Jan 1995 with life cover of Rs 50 lakh, a policy term of 20 years and paid life insurance premium regularly. In 2005, Mr. Kapoor died of a heart attack. Within a weeks’ time, his wife (nominee) contacted the insurance company and provided all the relevant documents and forms. She received the full life cover of Rs 50 lakh. Mr. Kumar survived the policy term and in Jan 2015 his policy was closed with no payout.
Now, you may be wondering “What’s the use of having a plan when I can’t get my money back?” Here is why:
Term insurance is the simplest and cheapest form of life insurance. You can get a large amount of coverage at a small premium. For example, a 25 year old healthy male can get life insurance cover of Rs 1 Crore for just Rs 27 per day with an annual premium of Rs 9,888. These rates are for ICICI Pru iCare II Option I with a policy term of 30 years and are inclusive of all taxes.
If you feel that the life insurance premium is expensive, think about this - Your life is more valuable than your car. For car insurance, one may spend between Rs 2,000 and Rs 20,000 for the yearly premium. If you believe that a car is worth insuring, then insuring your life is something you should never delay. It’s important to have the “peace of mind” that your family will always be protected against financial hardships. It’s a small price to pay to provide financial security.
PROTECTION + SAVINGS
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Participating Endowment Plans:
are insurance policies which provide both guaranteed and non-guaranteed benefits. The Life Cover is a guaranteed benefit and is paid upon the death of the Insured. Participating policyholders are allowed to participate or share in the profits of the insurance company’s participating fund. This is paid in the form of bonuses which are non-guaranteed benefits.
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Non-Participating Endowment Plans:
are insurance policies which pay just the Life Cover upon death of the insured. The policyholder does not participate or share in the profits of the insurance company’s participating fund and is not entitled to any non-guaranteed benefits.
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Unit Linked Insurance Plans (ULIPs):
In case of ULIPs, the policyholder’s money is invested in capital markets. A part of the premium that the policyholder pays goes toward providing Life Cover and the remaining is invested in different funds like equity and debt.
Apart from benefits like disciplined savings, tax deductions and life cover, ULIPs are ideal wealth creation instruments which provide:
Fund switch (movement of money between funds)
Premium redirection (future allocation of premiums in chosen funds)
Partial withdrawals (withdrawal of a specific amount from the complete investment in case of emergencies)
Top-ups (increase of existing investment if you have liquid funds)
Unlike traditional savings plans, both the rewards & risks of investment in ULIPs are with the policyholder.
Click here to explore our ULIPs and to calculate how your money can grow over time.
Retirement or Pension plans:
are designed to provide the policyholder with a regular income after they retire. In these plans, the policyholder has to invest either a lump sum amount or regular premiums during the payment term. In return, the policyholder will get regular income (pension) for life.
In some retirement plans, in case of death of the policyholder, the surviving spouse continues to get the regular income. Then on death of the spouse, the nominee (e.g. child) gets a lump sum payout. Retirement plans are available as traditional and ULIP plans.
Click here to check out our Retirement plans
