Types of Insurance Plans
1. Term Insurance or Term Plan
Term insurance or term plan is a type of life insurance plan that provides coverage for a specific period. In case of demise of the insured during the policy tenure, the nominee receives death benefit (sum assured). If the policyholder survives the entire policy term, no payout will be provided.
2. Endowment Plan
It is a life insurance plan which not just covers the life of the insured, but also helps them save regularly for a specific time period so that they can get a lump sum amount on the maturity of the policy.
An endowment plan is different from a term plan in terms of maturity benefit. Unlike a term plan, an endowment plan pays out DSA in case of an eventuality or MSA on survival of insured. Another difference is, endowment plans come with higher fees and premiums for paying out sum assured with profits in both scenarios – death or maturity.
3. Unit Linked Insurance Plan
A Unit Linked Insurance Plan (or ULIP) is a life insurance product which gives you both insurance as well as an investment with a single integrated plan. A portion of the premium goes towards life insurance whereas rest of the amount is invested in stock/debt market like mutual funds.
Unit Linked Insurance Plan (ULIP) is linked to markets and thus, returns are not guaranteed. However, in ULIP, you have the liberty to choose the investments’ allocation in stock/debt markets and its value is captured by the fund value. Also, ULIP is a combination of insurance and investment, whereas mutual fund is a pure investment avenue.