Insurance in India can be broadly categorized into two types: life and general. Life insurance can be further classified into term life insurance, whole life insurance, money back plan, endowment policy and pension plan. Health, home, accident, motor and travel insurances fall under the general insurance category.
Term Life Insurance Policy
As its name implies, term life insurance policy is for a specified period. It lets you select the length of time for which you want coverage, up to a period of 35 years. It has one of the lowest premiums among insurance plans and also carries an added advantage of fixed payments that do not increase during your term. In case of the policy holder's untimely demise, the benefit amount specified in the insurance agreement goes to the nominees.
Whole Life Insurance Policy
Whole life insurance policies do not have any fixed term or end date and is only payable to the designated beneficiary after the death of the policy holder. The policy owner does not get any monetary benefits out of this policy. Because this type of insurance involves fixed known annual premiums, it's a good option if you want to ensure guaranteed financial benefits for surviving family members.
Money Back Plan
With a money back plan, you receive periodic payments, which are a percentage of the entire amount insured, during the lifetime of your policy. It's a plan that offers insurance coverage along with savings. A unique feature of the money back plan is that in the event of the policy holder's death during the policy term, the beneficiary will get the full sum assured without having any of the survival benefit amounts, which have already been paid, deducted.
Pension plans are different from other types of life insurance because they do not provide any life insurance cover, but ensure a guaranteed income, either for life or for a certain period. You make the investment for a pension plan either with a single lump sum payment or through installments paid over a certain number of years. In return, you get a specific sum every year, every half-year or every month, either for life or for a fixed number of years.
An endowment policy can be taken out for a specified period. At the end of the stipulated period, the assured amount is paid back to the policy holder, along with the bonus accumulated during the term of the policy. Designed primarily to provide a living benefit, along with life insurance protection, the endowment policy makes a good investment if you want coverage, as well as some extra money.
Under the general insurance category, health insurance is one of the most popular choices. In India, Mediclaim covers hospitalization, expenses incurred during medical tests and for medicines. You can also get coverage for medical expenses by opting for the 'Critical Illness (CI)' rider available with life insurance policies. This means that in case of a 'critical illness' as defined by the insurance company during the policy tenure, you will be paid the amount as proposed in the policy.