What are Different types of Insurance Policies?

With so many choices of life insurance policies around, settling down with the right insurance policy can be really overwhelming. You do tend to get lost and wonder where to start from.

So to sort this out, you can answer a fundamental question which is. ‘Why do you need an insurance policy?’ Digging deeper into this question will help you to understand what kind of policy are you looking for? So, let's get down to figuring out the reasons for which you want to buy an insurance policy.

Reasons to buy an insurance policy

Life insurance is needed if you have a family which contains many dependents on you. If there are no dependents on you, then, you don’t need any insurance policy. Insurance policy is chosen to help your family pay their bills in case of an event of your sudden death.

Now, based on what amount of coverage you are looking at, you must choose your insurance policy. So, here are a few factors listed to help you understand your requirements better.

Personal factors: How many dependents you have in your family? What amount of coverage you think would be sufficient for them? What are your sources of income? What is your regular monthly income? etc. So depending on all these factors, you need to zero down on what kind of policy you would take? As per the thumb rule, you must look for insurance coverage of 15 to 20 times of your annual income.

Different types of life policies

The different types of policies range from life coverage plans, pension plans to money back policies.

Here, are different types of policies listed:

Term plan: These policies are given for a specific term or period. The family is paid the claim only if the death of the assured happens in the given time frame.

This policy works out for those who have no savings or any other sources of income to fall back to and especially when you are looking at insurance coverage for a specific period.

Whole life plan: These policies ensure your family for a lifetime. The family is paid the sum insured to the family whenever the death of assured happens.

This policy works out the best for those who have no savings to fall back to and are looking for life extended insurance coverage.

Endowment plan: Endowment plan gives you the full cash back along with additional bonuses and profits. If the assured dies in between the term of the policy, then the entire money is paid to the claimants. If the assured survives the whole term plan, then the whole cash is paid along with bonuses and profits.

ULIP: It is unit-linked insurance policy which invests in insurance as well as mutual funds. On the death of the assured, the mutual fund value or the sum assured is paid depending on whichever is higher.

These were the types of insurance policies available for you to choose from. After diving deeper into each of them, you will be able to make the right decision. After having selected the type of insurance policy, you need to compare the plans of different insurance firms and choose the most reliable one for you.

Moreover, you would be glad to know that you get tax benefit under section 80C of the Income Tax Act while opting for any insurance policies.