Broadly speaking insurance policies are of two types - life insurance and general insurance.
Life insurance policy pays out a sum of money either on the death of the insured person or after a set period in lieu of the premiums paid by the policyholder. The beneficiary could be the nominees or the policyholder him/herself depending on the various conditions.
There are 5 types of life insurance:
• Whole life policy
• Term life policy
• Endowment plan
• Unit-linked insurance plans
• Money-back policy
While the whole life insurance policy covers the entire duration of the policyholder's life, term policy can be taken for the specific period. The premiums are paid throughout the life in the whole life insurance. In the term plan, the premiums are paid for the plan tenor. If the insured dies or is incapable of earning during the tenor of the plan, the insured and/or his family get the sum assured.
Endowment plans combine the insurance as well as the investment aspect. They pay the sum assured along with the profits in both the scenarios of death and survival. ULIPs is a variant of endowment plan whose investment portion is linked to the stock market. Money back is also an endowment plan that earns you an income at regular intervals even as you pay the premiums.
All that is not covered under the life insurance, comes under non-life or general insurance. The general insurance covers:
- Health (health insurance, critical illness cover)
- Accident (personal accident cover)
- Travel (travel insurance)
- Property (against natural and man-made calamity)
- Car (Car Insurance, Two Wheeler Insurance)
- Crop (crop insurance) and others