A life insurance plan is considered as an ideal investment for individuals of every age. No matter your age, gender, or profession, it is advisable to invest in a life insurance policy at the earliest. You need to understand the various aspects of a life insurance plan before you take out one. Most importantly, you need to understand life insurance categories to make a well-informed decision. Listed below are three important life insurance categories that you should know about.
- Products offering pure risk cover
Insurance products under this category cover the risk involved. These include health insurance or term life insurance plans wherein the insured gets a lump sum in case of any event such as hospitalization, death, disability, or a critical illness. For instance, a term plan is an important type of life insurance plan falling in this category. It provides a death benefit in case of the untimely demise of the insured. It has a specific tenure and the policy will provide financial security to the family members of the deceased. However, the plan does not offer any monetary benefit if the insured outlives the policy tenure.
- Savings insurance products
One of the most important insurance categories is a savings insurance plan. Under this plan, the insured will accumulate a fund or a corpus that can be used at a later stage in life. The rate of return is the main criteria when choosing the plan. The return varies as per the risk involved in the investment. Life insurance plans such as endowment plans and retirement plans fall under this category.
- Products with a combination of risk cover and savings
Under this category, insurance companies offer products that provide a blend of risk cover and savings. A money back plan comes in this category. It is a unique policy wherein a certain amount of the sum assured is paid back to the insured at regular intervals as a survival benefit. The plan is also eligible for bonuses that are declared by the insurance company from time to time. It is ideal for meeting short-term financial goals and allows the insured to earn money at regular intervals.
The aforementioned are the three most common categories of life insurance products available in the market. However, if you are wondering thinking that “what kind of life insurance do I need”, you need to consider your personal requirements and then make a decision. All three types of insurance categories provide different benefits. You need to consider your age, financial goals, and the premium amount when choosing a policy.
It is a tedious task to select the right life insurance product. Therefore, the knowledge and guidance with regard to different products and the coverage can make a huge difference. A term plan is a pure risk cover while an endowment plan is a savings insurance product and a money back plan is a blend of savings and risk cover. Choose an insurance product keeping your life goals, risk appetite, and family responsibilities in mind.