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Types of Life Insurance Policy

Types of Life Insurance

Life insurance policies can be divided into different types on the basis of their objectives. The various types of life insurance policies are term plans, endowment plans, money-back plans, whole-life plans, Unit linked Plans (ULIP) and pension plans.

The two objectives of life insurance policies are investment and protection. We take a life insurance policy for protecting your life. The life insurance products are available in different forms such as those offering only investment, only protection or offering both investment and protection. You are advised to acquire knowledge about all these life insurance products and select accordingly.

Term Plans

This policy covers the risk of death. You need to pay premiums every year and after your death, the insurance amount is paid to your survivors or nominees mentioned in the policy. As this is a pure insurance product, it does not provide you with any kind of investment benefits.

Endowment Plans

This policy gives you sum assured and some returns even while you are surviving. But for taking this policy, you have to pay more premiums. As you are paying higher premiums, the insurance company can pay you returns and also provide you with protection. This insurance product is divided into two types:

  1. Without-profit endowment plans: In this plan, you are also entitled for a loyalty bonus and
  2. with-profit endowment plans.

Money back Plans

This is also a kind of endowment plans but has a major difference. The sum assured is repaid to you throughout the term of the policy and at regular intervals. The premiums are higher for this kind of plan. But you are entitled for bonus and in case of death, the entire amount of sum assured is paid to you.

Whole-life Plans

It must be noted that in term plans, endowment plans and money back plans, you are provided insurance cover only till the age of 70. But whole-life plans provide you with insurance covers for the whole lifetime. You can pay the premiums only up to certain age or till the specified time period. When you reach the age of maturity, you can either encash it immediately or continue it till death.

Unit-Linked Insurance Plans

You can obtain greater control of your investment and related premiums by taking unit-linked insurance plan. The working of these plans can be compared with that of mutual funds. The annual premium is invested in other types of funds such as debt funds or equity funds. You also have the option of switching to other plans and controlling your investment portfolio. If you have the knowledge of stock market, then you can invest more nicely.

Pension Plans

You can secure your post-retirement period by taking a pension plan. The maturity amount depends on factors such as your contribution, date of the policy, date on which you expect the complete amount and your age.  This pension plan is divided into two types:

Immediate annuity – when the payment is made to you on immediate basis

Deferred annuity – When the payout is done to you after certain years of deferment

You must always check with your reliable insurance agent before taking a life insurance policy. The policy must suit your requirements.

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Ankita Patil is Commerce as well as a Law graduate from University of Mumbai. She is a qualified Company Secretary from ICSI, New Delhi.


  1. Different life insurance policies are available in our country. Each of them has unique features. If you are planning to buy a policy you need to study the features of each of these and decide accordingly. On the contrary, you can also take the advice of your investment agent. Irrespective of the kind of policy you buy, go through the documents carefully.

  2. The many types of insurance available in the market helps to choose the one that is best needed for us. But it is always advisable to do a thorough market research, analysis and to take an expert help before investing. The full term insurance types and the ulip are equally beneficial if suited. At times individual opt for more than one insurance for dealing better with emergencies.

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