Insurance is one of the comerstones of financial planning. It covers you. your dependents and your assets against financial losses incurred in case of an unfortunate event. The concept of insurance is pretty simple. You pay a certain amount called the premium to the insurer for getting coverage of a pre-determined amount for any damages suffered. However. depending on what your insurance covers, they are classified as life and general. In this article, we will explain both these types ‘of insurance and their various aspects, What Is life insurance? ‘As the name suggests, life insurance covers your life. In case of the policyholder's premature demise within the policy term, the insurance company pays the sum assured to the nominee. One of the essential nancial instruments. life insurance. helps your family stay financially independent. square off lablities taken in the form of loans. maintain the lifestyle provided, and keep essential goals on track. ‘Types of life insurance Here are types of life insurance. 4. Term life insurance: ‘Term insurance is the simplest form of life insurance available in the market. A pure protection plan, term insurance offers extensive ‘coverage at an affordable premium. A 30-year-old non-smoking male can opt for a term plan providing @ coverage of Rs. 1 crore for a policy term of 30 years by paying @ nominal premium. Term plan gives you the flexibility to choose 2 sum assured 15-20 times your ‘annual income. It pays your nominee the sum assured in case of your demise within the policy term. The insurance proceeds received help your family to ‘meet daly expenses and pay off debts. Note that pure term plans have na maturity benefits. It means, in ease you survive the policy ‘term, you don't get these benefits. However, of ate, insurers have come up with the return of premium term insurance plans that return al the premiums paid if you survive the policy term. But these plans are slightly more expensive than pure term plans. 2. Endowment plans ‘Weaving insurance and investment in a single product. endowment plans offer fe cover and build a corpus for essential Ife goals. A certain portion of the premium goes towards the sum assured, while the other portion is invested in low-risk avenues. In case of your demise during the policy term, your nominee gets the sum assured. In case you survive the policy term, you get the sum assured as maturity amount along with the accumulated bonuses. Thus, endowment plans fulfl the dual needs of insurance and investment. ‘3. Money-back policies Money-back policies are similar to endowment plans, except they pay a certain amount at pre-defined intervals during the policy term. For instance, a money-back policy for a term of 15 years may pay a certain amount at the end of the Sth and ‘0th years of the policy ‘term. On policy maturity it pays the maturity benefits along with the accumulated bonuses.4, Unit linked insurance plans (ULIPs) Combining insurance and investment in a single product, ULIPs offer life protection and the opportunity for capital appreciation by ‘investing in various funds of varying degrees of risk. Like endowment policies in ULIPs a certain portion ofthe premium provides life cover, while the other is invested in markets to earn returns. ‘Additional Read: Step-by-step guide to choosing ¢ ULIP Every ULIP has underlying funds belonging to different asset ciasses such as equities. debt and hybrid where it invests to generate retums. ULIPs offer partial withdrawal after the end ofthe lock-in peri (S years) and provide a switching faclty whereby you can ‘switch from one fund to another. This facity comes in handy when you are nearing your goal, wherein you can switch from an aggressive fund to a debt fund, 5. Whole life insurance {As the name suggests, whole life insurance offers you coverage for your entire lf. The policy term for whole if insurance plans extends ‘upto 100 years and as long as the premiums are paid, the policy’ benefits are kept intact. If the policyholder survives the policy term, then he/ she gets the maturity benef. Ifyou want to remain insured throughout your life, whole life insurance plans area good choice to make.