Types of Insurance Plans

Insurance is securing your life or an asset against any unforeseen mishap. The insured pays a premium to the insuring body, who in event of any mishap financially compensates the insured. The insurance of life of an individual is classified under Life Insurance. While the insurance of non life entities, like vehicle, business, asset, etc is covered under General Insurance.

The Life Insurance plans are of 2 types, ones which are called traditional in which the returns are fixed or guaranteed and the other in which the returns are not guaranteed but depends upon the nature of investment, mostly in equities.


Types of Conventional Plans

Term Assurance : This type of insurance provides life coverage and could be redeemed only in case of death of the insured. This is for a fixed period normally 5,10,15,20,25 and 30 years. In this policy the premiums are normally very low and the sum assured is comparatively very high. However in the event of insured person surviving the tenure of the policy, the insured person does not get any money. This is a major disadvantage but the biggest advantage is that the sum assured is very high against a small premium. These policies are gaining lot of popularity in India.

Endowment Assurance : In endowment policies the insured pays a fixed premium for a period 15,20,25 or 30 years. The insurance company pays a fixed return plus bonuses to the nominee in the event of the death of the insured. If the insured survives the tenure of the policy, then also he is paid the guaranteed return plus the bonuses. This is a major advantage of this type of policy, that is, the insured gets some return in the event of no claim.

Whole Life Assurance : In this the insurance company collects premium from the insured for his whole life or retirement and pays the claim to the nominee/family of the insured only after his death. So this type of plan does not give any return to the insured, but is used to only provide financial stability to the nominee after the death of the insured.

Annuity/Pension Assurance : In this the insured makes a single lump sum payment or through installments spread through a number of years. The insurer in return pays a specific sum periodically from a specific date onward, called as deferment date. This payment can be monthly, quarterly, half yearly or annually either for the whole life or for a fixed number of years. Annuities / Pension funds are different from from all other forms of life insurance as an annuity policy / fund does not provide any life insurance cover but merely offers a guaranteed income either for life or a certain period. This policy is normally opted by individuals who have extra money to invest for maintaining a specific life style after their retirement.

Money Back : As the name suggests this policy provides pay back in between during the tenure of the policy. This is opted by people who may need periodical payments. These policies are issued for a specific period and the sum assured is paid in installments throughout the tenure of the policy. In the event of the death of the insured within the tenure of the policy, the sum assured along with the accrued bonuses is paid to the nominee.