subject: Making Your Choice Between Different Types Of Life Insurance Plans [print this page] When you have collected a large sum of money or saved bit by bit over time, you would not want to keep it idle; you would rather invest it in something worthwhile. Fixed deposits and other government policies are a common choice for most, but life and medical insurance policies are gaining popularity as investment options. This is because they offer a certain amount of interest as well as accidental coverage. There are many different options available for insurance, mainly divided into two main sections:
Traditional insurance policies
ULIPs
Traditional Life Insurance Policies
These are a few of the most popular and oldest plans available in the market. These act as a steady form of investment and are mainly debt instruments. Additionally, your sum of money is assured with bonus. Available for long tenure, these are usually fixed based on plan and age of the insurer. However, it is unlikely that you willbe allowed to withdraw before maturity.
This kind of life insurance plan usually includes four main policies:
Whole life plan, wherein the premium is collected till the end of the term of the policy, but the returns are given only after the death of the insurer.
Endowment plan, in which the premium is collected for a certain set of years, and it paysthe sum assured to the nominees in case of death of the insured during the policy period.
Moneyback plan, which is especially useful to the investor who needs periodical payouts.
Term plans, in which the insured gets maximum death, cover with minimum premium.
ULIPs
Also known as Unit Linked Insurance Plans, ULIPs offer extremely attractive features, thus have gained high levels of popularity. In this kind of policy, the companies offering insurance collectpremium from the client and invest the same into equity and debt markets. When the market offers returns, they are passed on to the investors at maturity. The best part is that the insurer gets both, cover for accidents and life as well as investment gains. It is extremely flexible and transparent. Along with this, it offers you the alternative of withdrawing money a few years into the plan, which is ideal for most investors.
These are the two main types of insurance plans holding investor interest today. When you are looking at buying a plan that suits your needs, it is important to know the exact offering, hidden costs and tax benefits they offer.
by: Sudeep Desai
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