Life is unpredictable! And so, while we live, we often stress about our future and family responsibilities. 

There may be several family goals that you have planned in life like starting a family, taking your parents on their first abroad trip, getting your child higher education in top colleges, purchasing a bigger house and so on. 

But what if you happen to meet with an accident or get terminal illness? 

This would affect your family emotionally and even financially. You may have to face financial burdens while taking medical treatments and in case of an unfortunate death your family goals may remain unachieved.

Insurance is a financial assurance for all these uncertainties. 

What is Life Insurance? 

Since, no one can predict what is going to happen in the future. Life insurance is like a backup plan for your family and helps them with an assured amount of money when you are not there. Thus, it makes your family secure in your absence.

What are the types of Life Insurance?

There are different types of life insurance in India today offering benefits to fulfil your different family goals. Thus, it’s important to understand the differences in each life insurance policy before you get one.

• Term Insurance Plans

Term insurance is the simplest and most basic form of life insurance policy that provides life cover for a pre-specified time period. The beneficiary receives a predetermined sum insured on the death of the policy holder within policy period. 

These are the most widely purchased life insurance in India as you can get a relatively higher sum insured at pocket friendly premium rates.

Term Insurance with benefits such as return of premium on maturity, increasing or decreasing sum assured on yearly basis, convertibility option is offered by several life insurance companies in India. 

You can opt for additional riders along with a Term Insurance like Personal Accident cover, child support, etc to increase the total coverage of your sum insured.

• Whole Life Insurance Plans

Whole life insurance policies are also termed as Permanent Plan as they provide a life cover for 99 years. In case, the policyholder survives up to 100 years, they would receive the matured endowment coverage as a maturity benefit. Thus, a Whole Life Insurance provides you with dual benefits of life cover and matured endowment.

You can consider buying a Participating or a Non-Participating Whole Life Insurance policy depending on your financial requirements. The premiums for a Participating policy are generally higher, but you can get the benefit of receiving regular dividends. While, the premiums are low for non-Participating policies as these policies do not offer dividend to policyholders.

• Unit Linked Insurance Plans (ULIPs)

Unit Linked Insurance Plans or ULIPs offer benefits of having both insurance and investment. The premiums paid for the purchase of these plans are divided into two: one portion is used to cover the cost of life insurance cover and the other portion is invested in equity funds, debt funds or other securities. Policyholders have the choice to select and switch amongst different funds available in these plans.

ULIPs are a very popular type of life insurance in India as they offer tax-savings benefits on LTCG. Investments by Individual and HUF in ULIPs are eligible for deduction under Section 80C. Further, Section 10(10D) provides an exemption for any sum received under ULIP, including the sum allocated by bonus on such policy.

• Child Insurance Plans

Child Insurance Plans are a unique type of life insurance in India. These insurance plans offer a life cover to the policyholder only for a single financial goal of ensuring financial well-being of their child. Purchasing these policies would ensure that your child’s future needs such as education, marriage, etc are taken care of in your absence. 

• Endowment Plans

Endowment Plans offer dual benefits of insurance and savings. These types of life insurance in India are best suited for individuals who want a life insurance coverage along with a sizable savings component.

The policyholder receives the benefits of a life insurance cover until maturity and a lump sum payment on maturity of their policies. You can consider buying an Endowment plan with or without profits depending on your financial requirements and risk appetite.

• Money Back Plans

Money Back Plans are one of the best types of life insurance in India as the policyholder gets a certain percentage of their total sum insured at regular intervals as a Survival benefit and the remaining sum assured would be given on maturity of the policy.

In case, the policyholder dies during the policy period, the beneficiaries of the policy would receive the entire sum insured without any deductions.

• Retirement Plans

Retirement Plans are a unique type of life insurance in India that provides benefits of financial stability after retirement along with a life cover. 

Under these plans, the policyholder would pay premiums until retirement to create a corpus. And after retirement, the corpus generated by the policyholder over the years would be distributed back to them as a regular income for a predetermined time period.

These plans also provide a life cover to the policyholder. Hence, if the policyholder dies during the policy period, the beneficiaries would receive the sum insured.

• Group Insurance Plans

Group life insurance in India is usually taken by corporations for the financial well-being of their employees and clients. 

You can avail the benefits of getting a life insurance cover at cheap premiums under a group insurance plan. However, one should know that the coverage offered under these group insurance plans are valid only until you remain a part of the group.

What is General Insurance? 

General Insurance on the other hand is like a financial filler which provides financial assurance for all non-life risks you may have such as treatment of illness, vehicle damages, damages to your house or shop due to accidents, theft, natural calamities, fire, man-made calamities, etc. 

What are the types of General Insurance?

• Health Insurance: When you fall ill, you will go visit a doctor and if your illness is chronic, you will need the best doctors plus a financial backup. You cannot out of the blue produce money and hand it over to the doctor. You cannot predict the future happenings but can be prepared for it by getting health insurance.
• Motor insurance: A motor insurance provides financial security to the vehicle owners against any financial loss due to accidental damage or other unfortunate events like theft, fire, natural calamities, etc. It also provides financial assistance in legal issues when a suit is filed against you for damage caused due to your vehicle accident.
• Housing Insurance: Home is the costliest asset for many individuals and losing it would be a great loss to them. Hence, getting Housing insurance for your biggest asset against calamities, burglary, fire, etc is the best option.
• Shop Insurance: Under a shop insurance, you can get an insurance cover for your shop, employees and even customers so as in future if any damages are claimed you will not suffer any loss as you have already planned it way back.
• Travel Insurance:  If you are a frequent traveller, getting a travel insurance is a good option as it offers security against loss of baggage, delay or cancellation of flights, accidents, or hospitalization expenses during your trips.

There can be several other forms of general insurance such as business risk insurance, insurance on loans, etc. which are offered by few general insurance companies in India.

What are the differences between Life Insurance & General Insurance?

After knowing the scope of coverage that life insurance plans and general insurance plans offer through different insurance types, we can differentiate the two on below key points:

Conclusion:

Insurance is a financial assurance for many forms of uncertainties in an individual’s life. However, you cannot just take insurance for all the financial goals you have due to several constraints such as HLV limits, your total income, your age, cost of insurance, etc. Hence, it is most important to consult an Insurance Advisor on your insurance needs who can guide you in appropriate product selection.