Types of Insurance Plans/Policies
Before deciding on the best life insurance company to get an insurance plan, a person should know the type of insurance plans available in the market. There are various types of insurance plans but they can be generally categorized as:
Term Life Insurance
Term life insurance policies are dirt cheap, especially for younger individuals. These provide life plan coverage for a fixed duration or term; i.e., they cover 5 years, 10 years and so on from the date of commencement of the policy. The coverage lasts for as long as the selected term. The life plans are one of the highly sought after plans among the best life plan companies present in the market.
On passing away of the insured individual, the nominee receives the sum assured. The premium is fixed for the term and is paid annually. The premium money is not invested by the insurance company and the premium payer receives no return at end of the term. The higher the age of the individual opting for the policy, the higher is the premium to be paid by the policy holder. It is recommended for people who are in their middle ages.
Permanent Life Insurance
The permanent life insurance can be further divided into following types:
Whole Life Insurance
In a whole insurance policy, the policy coverage is lifelong, i.e. until the day the individual dies. The insurer has the options of paying the premiums either lifelong, or for a fixed number of years or as an upfront lumpsum. The premium cost will be lower for life but higher for a limited number of years. The premium amount is fixed. A part of the premium amount is invested by the insurance company and the policy may give an annual return that may be cashed or used for premium payment. An individual is also allowed to take loan against the insurance policy but if unpaid, it will be subtracted from the end benefit. Almost all the best life insurance companies offer a whole insurance plan.
Universal Life Insurance
Universal insurance policies invest a part of the premium amount generally in fixed investments. The premium amount changes based on the return on investment. If there are losses on investment, the policy holder may need to shell out more money for premium.
Universal life policies can be further divided into:
It is the most affordable among all the permanent insurance policies. The coverage of policy is specified up to an age generally starting at 90 years. The returns on the policy are low as the premiums are quite low. It is generally recommended to people who have achieved quite a senior age.
Indexed universal policies also invest a part of premium in the market. These policies offer better returns than the guaranteed policies but are also capped limiting their growth when compared to variable ones. It comes with a minimum return guarantee.
It is a high-risk life plan policy. A part of the premium amount is primarily invested in the money market, such as equities. The policy has the potential for both building great returns hence reducing the premium but also running into huge losses thereby increasing the premium amount to be paid significantly. It may be purchased as a complimentary insurance in addition to a primary one.
There are various life insurance options available in the market. For a middle-aged person raising kids, the term plan is the most recommended one. But for a senior citizen in need of insurance, the guaranteed universal plan is suitable. There are plenty of other options available too with the leading life insurance companies. These plan categories will see modifications depending on the insurance company. Their pros and cons must be studied before investing.