Your family would always cherish your presence. When you are around your family, you take steps to fulfil all their financial goals. However, due to the rising unpredictability of life, you might never know what happens at any moment. In your absence, your family might face difficulty in sustaining financially. But if you own a life insurance policy, your loved ones can receive financial support to maintain their current standard of living after your demise.
In India, due to the massive need of life insurance and investment, there are various plans that might guarantee financial protection. According to a survey conducted by the Insurance Regulatory and Development Authority (IRDA), over 32.81 million life insurance policies are in force today. Moreover, there are tax saving investment plans, which help you to save money. Therefore, let’s take a look at these top four types of life insurance and investment plans for you to choose from:
- Unit Linked Insurance Plan (ULIP)
A ULIP plan is a unique financial product, which is a combination of two components: investment and insurance. A ULIP plan offers financial support to your loved ones by providing a death benefit in your absence. As the nominees of your ULIP policy, your family receives a tax-free death benefit under Section 10(10D) of the Income Tax Act, 1961. Moreover, it allows you to claim a tax deduction up to Rs. 1,50,000, according to Section 80C, on your taxable income.
- Traditional life insurance
The main purpose of traditional plans is to provide financial security to you and your family members. It offers life coverage to you and your loved ones for an entire lifetime. While a major proportion of traditional life insurance is channelled towards savings, the other half of your investment is directed towards insurance. Under traditional life insurance, there are two types, which are as follows:
- Endowment plans
Under an endowment plan, you can receive a lump-sum amount by the end of the tenure of your policy. For instance, if your policy is for 20 years, you are eligible to receive the whole amount after 20 years.
- Money-back plans
Under a money-back plan, you receive your money at regular intervals. For instance, your insurer would pay the money back in the 4th year, 8th year, and so forth.
- Term policy
A term insurance is a pure protection plan. With term insurance, your family can receive financial protection in your absence. After your demise, your insurance provider provides a death pay out to your loved ones. In case you survive your term policy, you wouldn’t receive any survival benefits. A term policy offers high coverage at a low price. For instance, you can receive coverage of Rs. 1 crore at an annual premium rate of Rs. 7,800
- Pension plan
A pension plan allows you to invest money to generate a retirement corpus as well as receive a monthly income after your retirement. Under pension plans, you receive a fixed pay out, which is taxable during maturity. However, the benefits of a pension plan might vary based on the type of plan you select.
The following are the types of pension plans:
- Traditional pension plan
- Unit-linked pension plan
- Annuity plan
- Pension plan with/ without life coverage
As highlighted above, life insurance is categorized as pure risk coverage plans, a combination of investment and insurance, and pure insurance-based plans. While buying any type of investment plan or an insurance policy, you should consider your financial needs, investment goals, and risk appetite. Select a reputable insurance company and compare various options in the market before finalizing a plan for yourself.
