Life Insurance
Life Insurance Basics: Insurance that pays out a sum of money to designated beneficiaries when the insured person dies. The main purpose is to provide financial security to dependents.
Types of Life Insurance:
Term Life Insurance:
- Pure insurance coverage for a specific period (10, 20, 30 years)
- Lower premiums compared to other types
- No investment component
- Pays only if death occurs during policy term
- Good for young families needing maximum coverage at minimum cost
Whole Life Insurance:
- Coverage for entire lifetime
- Includes an investment/savings component (cash value)
- Higher premiums than term insurance
- Cash value grows tax-deferred
- Can borrow against cash value
- Guaranteed death benefit
Unit Linked Insurance Plans (ULIPs):
- Combines insurance and investment
- Part of premium goes to insurance, part to investment
- Investment options in stocks, bonds, or hybrid funds
- More market risk but potential for higher returns
- Usually has lock-in period
Endowment Plans:
- Fixed term insurance with savings component
- Pays out sum assured if insured survives policy term
- Lower returns but guaranteed benefits
- Good for conservative investors
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