Types of life insurance policies

Types of life insurance policies

Insurance is good option of savings and coverage of life. In this article, we will talk about Life Insurance. Before a person purchase any policy or even call the agent to understand different policies the company offers. It may happen that either the agent may not understand the requirement or he / she may not give enough time to explain different types of policies.

There are four types of Life Insurance Policies.

1. Whole life policy.

2. Endowment policy

3. Term policy

4. Unit linked policy

1. Whole life policy :

In this type of policy, life coverage is for the whole life and premium payment period may be life long or for a limited period. LIC, the giant life insurance company, has considered the life of a policy holder to be 80 years. So in this policy, one will get money back on maturity i.e. at the age of 80 (with accrued bonus), or death whichever is earlier. In this types of policies, the premium may be less as the period of payment is more.

2. Endowment policy :

In this type of policy, we can decide the term of life coverage and premium payment i.e. monthly, quarterly, half yearly, yearly or one time payment. In this type of policy you get the money back at an earlier age as compared to whole life policy.

3. Term policy :

In this type of policy, only the life is covered. One doesn't get bonus on the policy and hence the premium is the lowest in such policy. This is the cheapest policy.

4. Unit linked policy :

This policy is transparent. The money collected thro' such policies is invested in equity or other type of investment. One can decide where one's money should be invested, and one can check the portfolio every quarter.

One should buy policies in such a way that till his earnings, he can pay more premiums and on retirement one gets good fund from the interest of which one can live smoothly. In my opinion, the best ratio is 70 % of term policies, 20 % endowment policies, 10 % whole life policies and 10 % unit linked policies. The ratio may change as per individual needs.

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