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Life Insurance Types|| Definition & importance - in simple words

Life Insurance Types

Life Insurance -Types, Importance & Benefit 

Everyone has goals, whether they include owning your own home, paying the mortgage, providing for your family, or something else.

Achieving these goals depends on things like steady income or good health.

But these can be dedicated to unexpected events, such as unemployment, auto accident, injury, illness, or death.

Unfortunately, you can’t stop these events from happening. But you can help make sure you or your family are covered financially in case they do happen.

By having the right type and amount of insurance you can continue to achieve your goals and peace of mind.

The type of events that insurance can help you protected financially against include injury, illness or redundancy.

If you get sick, insurance can help cover those unexpected financial commitments such as recovery, debt repayment, lifestyle changes that have help to you.

Life insurance is specifically, design to protect your beneficiary financially should you pass away one day so what exactly is life insurance definition and how does it work.

It also explained the policies and life insurance for children.

What is life insurance?

Life insurance is a contract between an insurer and a policyholder in which the insurer guarantees payment of death of the insured to put to simply.

You pay a sum of money called premium to the insurer and when you pass away your beneficiary usually your family members get a lump sum of money called the death benefit.

Should you buy any life insurance

You should buy insurance if you have anyone who may depend on you for financial support or when someone requires you for your financial support.

For example your kids or elderly parents however if there is no one that requires you to support financially than life insurance not required.

Now let’s take a look at a typical example of life insurance.

We have john a 50-year-old sole breadwinner of a family with a wife and two lovely kids like most families.

John has a property if the mortgage 20,000 kept aside in cash and the same amount he owns to the creditor in debt of 20,000.

Firstly his 20,000 cash aside might be taken away by his creditor secondly because he’s the only one working in the family his property or mortgage might be taken away as well this leaves his wife and kids with no shelter and no money to survive his kids might also, be in college and will depend on the needed funds for education but the wait can all the problem be avoided if and only if john had a little lie insurance.

What if life insurance is acquired?

Now let’s take a look at if john did purchase a life insurance policy if john did purchase the insurance.

 His commitment will be to set aside a portion of his income and give it as a premium to XYZ life insurance Company upon john's death.

XYZ insurance company will provide john's family a lump sum that is called the death benefit which would go to his family.

Now this lump sum of money can be used to pay his mortgage loan his family expenses in most jurisdictions this sum of money is being protected from his creditor his children now also have the requires money to go into college.

Now you see why life insurance is important to everyone with a dependent.

“Think about your future today and not in the future”

Life Insurance Types

There are many types of life insurance that are present in the market and all insurance are looking the same and always a common man is confused with all the insurance policies and buy a wrong policy.

So now we will tell about the category and types of life insurance.

6 Types of Life Insurance

       1.Term Insurance
       2.Whole Life Insurance
       3.Endowment Plan
       4.ULIP(United linked Insurance Plan)
       5.Money-Back Plan
       6. Annuities/Pension plans

Let’s understand these all categories in detail and look at the benefit of these policies.

Term Cover or Term Insurance

It is a pure insurance product. There is no saving or profit option in this policy.

For example, if any person takes 1 crore term insurance and if death, so insurance company return sum assured amount (1 crore) to his family.

But the person is alive then he will not get any amount from the company.

That is the reason that the premium is less of this policy and more cover insurance.


      · Less premium or High profit

Whole Life Insurance

 It is equal to term insurance it provides the cover of a lifetime but you pay more premiums to grab this policy.


      · The Biggest Benefit of this policy. You will get all benefit of this policy with term cover for a lifetime.

Endowment Scheme

In this policy plan, you will get a saving option with insurance.

 There is two option exists if the policyholder is death during the policy period then the company give sum assured amount to his family.

And another option is if the policy period over and policyholder are alive he gets a bonus with sum assured.

The premium and charges of Endowment policy are high and less risk-return will also less.

 It looks like a traditional insurance plan, which we see from many posts.

Endowment Plans Benefit

      · It is good for long term planning.

      · We can earn decent benefits or maturity at low risk.

Money-Back Plan

It is almost the same as the endowment plan. In this policy, the policyholder gets some % of sum assured year by year and when the company declares bonus then policyholder also gets the benefit of the bonus.

Money-Back Plan Benefit

      ·  It is a good product for short term insurance.
      ·  You can earn some returns with maturity.

ULIP (Unit Linked Insurance Plan)

ULIP stands for a unit-linked insurance plan in this policy you will get investment benefits with insurance.

When you buy ULIP than you have an option that you can invest your premium in the debt market or equity market. You can decide when you buy the policy.

There is high charge in ULIP but if you select the equity market then you can well return in the long term but this return is totally depending on your selected fund.

ULIP Benefit

     · You can get a max return from other policies in the long term.

Annuity/Pension Plans

It is different from other policies if you want to earn regular income like a pension so these policies will be best for you.

In this policy, the policyholder pays the premium one time he can earn a pension annually, monthly, quarterly.

Annuity/Pension Insurance Benefit

     ·  This policy will be best for future or retirement.

Now we understand all the types of life insurance. There is much insurance is there but these are the main life insurance.

If we talk about life insurance there are some advantages if life insurance is available. Let’s get to them.

Benefits of Life Insurance

     1.Protecting your Family
     2. Protecting your Bossiness
     3. Ensuring that all your liabilities or canceled

Protecting your Family

You see your family is dependent on an income that you generate. And they are dependent financially to ensure that income will keep them going for the rest of their life. If something did happen to you this income needs to be protected for them.

So life insurance is not for you it is for your family. You need the right insurance to protect your family.

Protecting your Business

A second most important benefit of life insurance is you protecting your business.

 If you are a business owner will have as a person is taking care of profitability the sales, marketing, and every different aspect of that bossiness.

That key person is removed from that place all of a sudden a lot of business just collapse and for that reason, you need to protect it by using life insurance.

Ensuring that all your liabilities or canceled

The most important reason for having life insurance is to protect you against liabilities.

 A lot of people own liabilities like mortgage or business loans or corporate loans or personal loans.

 When they pass away from these get passed on the next generation so we need to make sure that these are immediately canceled if something happened.

These are the primary benefits of life insurance so now if you want to know more speak to a financial advisor they will guide you another benefit of life insurance.

Google people also ask

1. What are the three main types of life insurance?

     1.Term Insurance
    2. Whole Life Insurance
    3.  Endowment Plan

2. What do you mean by life insurance?

     Life insurance is a contract between an insurer and a policyholder in which the insurer guarantees payment of death of the insured to put to simply.
3. What is the main purpose of life insurance? 

You should buy insurance if you have anyone who may depend on you for financial support or when someone requires you for your financial support.

Note:- please do all kinds of investment regarding insurance and others with the financial advisor to protect for any kind of spam and loss.

Share with your friends and a person who is looking to buy life insurance if you believe sharing is caring and comment your thought in the comments box.

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