Buying an insurance will help you cover your financial requirements when in need. There are various insurance plans available depending on the need of the customer.
So, one should choose the plan which suits the needs perfectly. Else choosing the wrong plan will make you lose the premium also.
Before choosing the plan, it is very important to understand about policies and terms to avoid misunderstanding.
1) What is an Annuity?
An annuity is a type of life insurance policy in which an insurance company pays an income stream to an individual, usually until death, in exchange for the payment of a lump sum.
Usually, the annuity is used at retirement when lifetime savings are converted into an income stream.
At the event of death, there is usually no payment to the estate, although many annuities include a provision to pay an income to the spouse.
Immediate annuities provide an income from the date the policy is accepted and deferred annuities at a future date.
2) What is an Endowment policy?
This is a type of insurance policy with a savings component which helps in asset accumulation and a life insurance protection component.
Means, in case where the death occurs before maturity, the sum assured is paid out. At maturity, the amount accumulated is payable.
There are number of endowment policies such as participating or non-participating and are long-term contracts.
3) Participating and non-participating in Life Insurance
Non-participating or without profit policy are policies where the policyholder is not entitled to a share of the company's profits and surplus. Means, no bonus is paid to the policyholders.
Policies like term insurance or health insurance and unit-linked insurance contracts come under non-participating or without profit policies.
Participating is a life insurance policy where the policyholder are entitled in the profits of the company such as the bonus. Such polices have a higher premium compared to non-participating policies.
4) What are Pension products?
A pension policy which is specially designed for retirement benefits i.e. pensions or annuities. Pension products could be unit linked or non-linked.
5) What are Insurance Riders?
Insurance Riders are like add on options which can be availed by paying an extra premium. These riders provide extra coverage and can be added to linked and non-linked life insurance policy.
6) Unit-linked Life Insurance Products (ULIPs)
Unit-linked life insurance products are different from the traditional insurance products and are subject to risk factors
Premiums paid in ULIPS are subject to investment risks associated with capital markets and NAVs of the units. The returns are broadly based on the performance of fund and factors influencing the capital market.
7) Whole life policy
These life insurance policy provides lifetime protection, the premiums must be paid only for life. The sum assured is paid out whenever death occurs. Commonly used for estate planning purposes.