What is Traditional Life Insurance & Their Types?

 

Life insurance is something which can’t be taken lightly anymore. Considering the shortened lives people are leading these days due to frequent accidents and unbalanced lifestyles, there are no guarantees to their lives. Surely, life and death aren’t in anyone’s hand; its unpredictable, but the least you can do is secure the future of the ones you love well beforehand so that if anything happens to you, they won’t be facing a precarious situation.

Gone are the days when traditional life insurance was a thing of the past because they have definitely made a comeback and strongly so. These days, people are much more open to buying this kind of insurance rather than the more modern types. This change in the insurance industry has been brought on mostly by the insurance agents because traditional insurance guarantees them a higher rate of commission as compared to others.

Traditional insurance – Essentially, just insurance rather than an investment

Surely, now there are so many insurance plans available. Some provide life cover while others are more of an investment. This wasn’t the case years back. When the concept of insurance was first introduced in the market, traditional life insurance policies were the only option for people. But that doesn’t mean that traditional insurance didn’t deliver returns. On the contrary, traditional life insurance guaranteed returns but as compared to equity, the returns were low.

Some of the main features of traditional life insurance are:-

  • Since the risk factor is low, the returns will also be low.
  • No option to suggest how your money should be invested by the insurance company.
  • A maturity amount is guaranteed at the end of the policy term
  • You have to invest for a pre-determined policy term in order to get the full maturity amount. You don’t have the flexibility to surrender it midway and expect to get a good amount back.
  • No partial withdrawals in case of an emergency.

Some of the different kinds of traditional life insurance are:-

  • Term insurance:Its pure life cover distinguishes this basic insurance type only in the case of the death of the insured. Considering there are no profits associated with it, the premiums are relatively low as compared to others. The amountguaranteedis only paid out to the nominees if the insured dies. There is no payout in case of survival.
  • Endowment plans:Although there is quite a bit of similarity with term plans, endowment plans differ with respect to the maturity advantages. With the termpolicywhere the sum assured is paid out only if the policyholder passes away, endowment plans ensure that the sum is paid out both in case of death and survival.The premiums for these plans are comparatively higher.
  • Money back policy: This is atraditional life insurance plan which is both an investment and insurance. Sure, you will get a guaranteed amount on maturity of the policy, but you will also be getting a percentage of returns periodically during the term.
  • Whole life policy: This type of insurance plan is done to cover the entire life of the policyholder. The term could be as high as 100 years and at its maturity, the policyholder gets a lump sum amount.

So these are some of the different kinds of traditional life insurances that you can opt for to secure your family’s future when you aren’t there.