You are no stranger to the importance of investing in life insurance plans for the financial security of your loved ones. However, it is common for new investors to feel overwhelmed with so many options out there. One of your friends may have recommended you to endowment policies while an online article may be raving about the affordability and large coverage of term insurance.

With several types of life insurance, it is only natural to feel confused and unsure about investing in the right product. And amid all this confusion, you may end up deciding on buying the wrong product.

Here, we will talk about kinds of online life insurance plansand their benefits so that you can take a calculated risk and a sound investment decision.

Before that, let us talk about lifeinsurance plans and what they mean.

What is life insurance?

Life insurance plansare contracts between the insurance company and the policyholder where the latter pays a premium for a number of years in return of a promise that the insurer will pay a pre-defined sum assured to the beneficiary upon their passing.

However, not all policies only offer a death benefit. Someof them also provide maturity benefits if the insured survives the policy term. It is important to note that different policies have different provisions. Therefore, you must choose one that is closest to your budget and lifestyle requirements.

There are five types of life insurance plans. Let us discuss each in detail.

1. Term Plan
It is a pure life cover that offers comprehensive coverage in affordable premiums. When you invest in a term insurance policy, the premium you pay to the insurer for a certain number of years is used to provide financial protection to your family in case of insured’s untimely death during the policy term.

However, if you want maturity benefit, then you can invest in return on premium option where the total of all premiums is paid back to the policyholder if he/she outlives the policy tenure.

2. Whole life insurance
As the name suggests, when you invest in a whole life insurance policy, you get life coverage. If you pay your premium regularly, then the insurer promises to pay the death benefit to the policy nominee upon your death.

Apart from the sum assured, there is also a savings component that allows you to either reinvest the amount for wealth creation or remit the cash value to meet lifestyle expenses. You can also apply for a loan against your savings portion of the insurance.

3. Endowment policies

Just like whole insurance plans, these too are savings and protection policies. You pay premiums timely and regularlyand become eligible for a death benefit. This benefit will be passed on to your loved ones in case of your untimely death. At the same time, if you outlive the policy term, then the entire amount is paid to you as maturity benefit.

Additionally, other than life insurance, there is also a savings component. You can use this to fund financial emergencies or even take a loan against it.

4. Moneyback policy
The key benefit of these plans lies in receiving a portion of the sum assured at regular intervals during the policy term. The remaining amount is paid to you upon maturity. No other life insurance plans give you this kind of benefit. However, in case of your demise during the policy tenure, the nominee will also receive the death benefit, despite the survival benefits that you have already received.

5. Unit Linked Insurance Plan (ULIP)

ULIPs are known as a combination plan that offers you the benefit of life insurance along with an investment component. The premium that you pay is partially allocated to life insurance. The remaining portion is invested in varied asset classes based on your risk-taking ability.

With its 5-year lock-in period, ULIPs encourage investors to focus on long-term investments. The longer you stay invested in this plan, the more wealth you can create with the help of power of compounding. However, if you pass during the policy tenure, your loved ones become eligible for the sum assured as death benefit.

6. Child plan
A child plan is useful in building a corpus that can be used for education or marriage of children. Most child plans are designed in such a way that they offer a one-time payout once they turn 18 years of age. However, should something happen to you during the policy term, then the amount is immediately payable to the policy nominee. You can also look for child plans that waive off future premiums on the death of the policyholder while the policy remains active till its maturity date.

7. Retirement plan
This is yet another robust life insurance product that helps in building a corpus for your retirement and keeps you financially independent even after the age of 60. In case of your untimely passing, the insurance company pays the sum assured to the policy nominee as directed in the policy.

If you survive the policy period, then the insurer pays you vesting benefit, which is a payout of the fund value that can be used to buy an annuity. The primary purpose of investing in a retirement plan is to build a corpus for your retirement.

You can start by setting your goals, expectations, and anticipated expenses to help you come up with a reasonable sum assured. It will give your family adequate financial support in case of your passing. Use this guide to understand different kinds of online life insurance plans. If you are buying life insurance for the first time, then don't hesitate to take help from financial experts.