Which Life Insurance Policy Should I Buy?

Life insurance is a plan that may be purchased from a life insurance provider. It assists the beneficiary of the insured in receiving financial support after the sudden demise of the policyholder. It is a legal contract between a policyholder and the life insurance company, which offers a pay out of money in case of the demise of the insured or critical/terminal illness. To limit the liabilities of a policyholder certain exclusions are mentioned under the contract, for instance, claims related to fraud, suicide, and war. The premium paid or cost on the life insurance decides the kind of coverage you would receive under a life insurance plan.

It can be a form of savings in the long term or can be tied along with a pension plan. Life insurance can offer safety, facilitate other retirement savings and protect home mortgages.

Types of Life Insurance Plans

There are several kinds of insurance plans available in the market such as term insurance, whole life insurance, ULIPs, pension plans, money back plans, etc. Let us understand about each of these plans, so that you can consider buying an insurance plan that best fits your needs.

1. Term Insurance Plan

Term insurance is a plan that is for a specified period of time and has the lowest payable premium amount as compared to all insurance plans. The length of the term can be opted by you for which you would want coverage, till 35 years. In the event of your untimely death, your nominee would get the death benefit amount mentioned in the insurance agreement.

2. Whole Life Insurance

A whole life insurance plan does not have any fixed end date for the plan. Just a death benefit is there and is paid to the beneficiary mentioned in the agreement. There are no survival benefits associated with the plan i.e an insured individual is not entitled to receive any money during their life. The primary benefits of having a whole life insurance plan is guaranteed cash values, death benefits, known and fixed annual premiums.

3. Endowment Insurance

It is an ideal insurance plan in case you have a career path for the short term and wish to enjoy the advantages of the plan (initial sum and bonus accumulated) during your lifetime. These plans are beneficial especially at the time of your retirement, by purchasing an annuity plan with the sum received, it helps in generating a monthly pension for your remaining life.

4. ULIPs

Unit linked insurance plans or ULIPs are popular investment instruments amongst people as they include the advantages of life insurance plans alongside mutual funds. A specific part of the premium is invested in the listed debt/equities/bonds, and the remaining is used in providing for fund management expenses and life insurance.

5. Money Back Plan

With a money back insurance plan, you get a specific percentage of sum assured regularly during the policy lifetime. These plans are ideal for people who are looking for both savings as well as insurance cover. It helps in creating an opportunity for long term savings with a reasonable return rate, especially as the payout under specific conditions is considered exempt from tax.

6. Pension Plans

There are two types of pension plans offered by an insurance company----- unit linked and endowment. The endowment plans invest in income products that are fixed, so that rate of return is low. On the other hand, Unit linked plans are comparatively more flexible. A policyholder can stop investing in it after 10 years and the funds would keep compounding your corpus until vesting date.

7. Riders: Comprehensive Cover

Along with the insurance cover of your choice, you may wish to consider extra risk covers, in which case you can go for riders. These riders enhance the coverage of the plan and can be bought with an insurance plan.

Conclusion

Life is uncertain, therefore, it is always better to plan ahead and safeguard your as well as your family’s future. You can go through the types of life insurance plans available in the market and opt for a plan as per your needs and budget.

Also read - How to Make a Claim Under Term Insurance Plans?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.