Part - 1 LIC // Life Insurance Premium // Tax Benefit
Types of life insurance plans
Here are the types of life insurance plans available in the market –
Term life insurance plan
Term life plans are the most basic insurance plans which promise to pay a benefit in case the life insured dies during the term of the policy. These plans have the lowest premium rates allowing you to choose a considerable sum assured which would be sufficient in taking care of the financial needs of your family in your absence.
Whole life plan
Whole life plans are insurance plans which run for the entire lifetime of the insured till he/she reaches 99 or 100 years of age. These plans pay a death benefit whenever the insured dies before reaching 100 or 99 years of age.
Endowment insurance plans
Endowment insurance plans are savings oriented insurance plans. These plans pay a death benefit if the insured dies during the tenure of the plan. Moreover, if the insured survives till the end of the plan term, a maturity benefit is also paid. The death or maturity benefits are guaranteed. Thus, endowment insurance plans help in creating a guaranteed corpus.
Money back insurance plans
Money back plans are endowment insurance plans which pay a part of the sum assured at regular intervals during the term of the plan. Thus, money back plans provide easy liquidity and pay the benefits at regular intervals to meet your financial needs. Despite the instalment sum assured paid, the death benefit is not reduced. The entire sum assured is paid in case the insured dies during the coverage tenure. On maturity, however, the remaining sum assured is paid.
Pension plans
Pension plans are retirement oriented life insurance plans. There are two variants of the plan. In deferred pension plans you choose the policy tenure and pay premiums doing the tenure. Once the plan matures, the maturity proceeds are paid in instalments called annuities throughout your life. However, if you choose an immediate annuity plan, you pay a lump sum premium and thereafter receive regular annuity pay outs throughout your life. Annuity plans, therefore, help you in creating a source of regular income after retirement.
Unit linked insurance plans
Unit linked insurance plans are insurance plans which give market linked returns. The premiums paid under the plan are invested in market linked funds which give returns depending on the performance of the capital market. Returns under unit linked plans are, therefore, not guaranteed and depends on market movements. However, unit linked plans help give you investment returns along with insurance protection.
Besides these types of life insurance plans, there are rider benefits too which are available under the plan. Riders are additional coverage clauses which enhance the coverage of the base plan by providing additional coverage at minimal premium rates. The popular riders include the following –
Accidental death and disability benefit rider which pays a benefit in case of accidental death and disablement
Critical illness rider which pays a benefit in case of diagnosis of a critical illness which is covered under the plan
Term rider which pays double the sum assured in case of death during the policy tenure whether accidental or natural
Hospital cash rider which pays daily hospital cash benefit in case of hospitalisation.
Different riders give tax reliefs under different sections.
Now that you know the types of insurance plans, lets understand the benefits which are payable under life insurance plans too –
Benefits paid under life insurance policies
Death benefit
Death benefit is paid when the insured dies during the term of the policy.
Maturity benefit
When the chosen term of the policy comes to an end, the plan pays a benefit. This benefit is called maturity benefit.
Bonus
Under many endowment or money back insurance plans bonus is also paid on maturity or death. Bonus is a part of the profit earned by the insurance company in a policy year. It is not guaranteed and depends on the amount of profit earned by the insurance company.
Surrender benefit
Surrender benefit is paid when the policy is surrendered before the completion of the policy tenure. In case of surrender a part of the sum assured is paid as surrender benefit.
Partial withdrawals
Partial withdrawals are allowed under unit linked insurance plans. Under partial withdrawals a part of the fund value can be withdrawn any time after the completion of 5 policy years. Partial withdrawals give you liquidity.
Now that the plan benefits and plan types have been understood, here is how life insurance policies give tax reliefs –
Tax benefits of life insurance policies
The list of different banks and their interest rates offerings in 2019 are mentioned below. This rates are from lowest 7 days to maximum range of 10 years.
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