What are the three types of life insurance?

The selection of life insurance is much better to assure your family’s financial security. Many people in the country have bought life insurance, but most of them don’t know what type of life insurance they own. We’ll tell you the life insurance types based on which you’ll be able to take out a life insurance plan.

Life insurance is a policy that agrees to compensate for a certain amount of money in the case of the incidents the insured is covered for. Overall, life-insurance is a partial solution to death-related problems.

Life insurance typically is judged based on the owner’s necessities and intentions. Term life insurance gives coverage over a fixed period, while whole and universal life insurance, grants coverage over a lifetime. It is critical to perceive that the mortality benefits of all life insurance types are commonly tax-free of revenue.

Types of Life Insurance

Life insurance policies have three different types. Such as-

Protection Plans

A protection plan is a plan which covers all your different needs in one. You don’t get to purchase several policies individually, just lost when it comes to average prices.

These insurance plans are unique or exclusive contracts that give a particular guaranteed sum or death benefit to the beneficiaries or nominees or families. If you no longer survive the tenor period, you will receive benefits in the form of a lump sum amount from the assured sum.

If you get sick or face a life-challenging disability, your insurance service providers will offer you some financial support. Thus, a life insurance protection plan provides you with multiple benefits.

Savings Plans

Savings Plans aim to offer consumers an alternative to fixed deposits or other savings instruments and are designed to provide long-term maturities that are fixed or predictable. Consumers are commonly enrolled in an endowment or moneyback plan where the policyholder receives payouts from time to time against the bonuses paid in the initial years. These policies generally take 10 to 20 years to complete. While the IRR (return rate) of such products is usually in the range of 5-8 percent, it still serves as a means of forcing users to save money for retirement and other future needs. A large number of these policies are being sold during the window from January to March when people across India are scamming for tax-saving instruments.

Wealth Creation Plans

Wealth Creation Plans are products that aim to maximize consumers’ invested surplus so that they can build their wealth over the long term. Unlike savings plans, the premium invested in these plans is invested in stocks, bonds, and other instruments that have a higher risk-return ratio compared to savings plans that invest in secured instruments such as government bonds or capital-secured instruments. In such policies, a limited part of the premium charged goes into providing a minimal life insurance policy to the beneficiary. At the same time, the rest of the payment is spent on the instruments of asset formation. Insurance products such as ULIP (unit-linked insurance plans) come under the product suite of wealth creation, and these plans directly compete with other wealth creation products such as mutual funds, REITs, direct equities, PMS, etc.