What Type of Life Insurance Should You Buy?
Updated On Jul 01, 2021
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A life insurance policy provides an umbrella for the financial protection of your loved ones in the face of an unfortunate event. Thus, it becomes essential to select the right life insurance plan after carefully assessing your personal and family goals and comparing different policies to enhance the safety net. The following article talks about different life insurance policies to help make comparisons and choose the right plan.
Types of Life Insurance Policies
Mainly, there are 7 kinds of life insurance policies that can be customized according to individual needs.
1. Term Insurance Policy
The affordability of a term life insurance plan makes it pretty popular among individuals who plan on buying a life insurance policy. Under this, death benefits are received by the beneficiary if the life assured passes away within the policy duration. Moreover, the beneficiary can choose the option of getting the benefits as monthly income, which acts as income replacement to the nominee. However, unlike other policies, a term insurance policy is for a specific period and does not offer maturity benefits to the life assured if he/she survives till the term ends. The policy can be further divided into 3 plans:
- Level Term Life Insurance - Under this, the amount of death benefits throughout the policy duration and premium after renewal stays the same.
- Decreasing Term Life Insurance - Under this, the amount of death benefit declines with time; however, the premium amount remains constant after renewal as well.
- Increasing Term Life - Under this, the value of the life cover and the premium amount grows with time.
2. Whole Life Insurance Policy
Under a whole life insurance policy, the life assured can enjoy live coverage for the entire life, even if he/she lives up to 100 years. Moreover, the policy's cash value component grows with time and can be withdrawn anytime, even to avail a loan sometimes. However, a reduced death benefit would be offered to the nominee if the life assured dies before the loan repayment.
3. Unit-Linked Insurance Policy
The provision of providing dual benefits of life coverage and investment opportunities in a single policy plan makes ULIP unique and different from other plans. According to this plan, a certain amount of the paid premium is kept for life coverage by the insurer. At the same time, the remaining portion is invested in debt, or equity or both, whatever resonates with the life assured's long-term family and financial goals like a new house, children's education, retirement planning etc.
4. Endowment Policy
Endowment policy offers a twofold advantage of a life cover and savings in a single plan to the life assured. Under this plan, maturity benefits are provided to the life assured or beneficiary after completing the policy duration. Moreover, the nominee will be paid the sum assured along with some bonus evaluated according to the number of years lived by the life assured before policy completion, in the event of the life assured’s death.
5. Money Back Life Insurance Policy
According to the money-back life insurance plan, a percentage of the sum assured at uniform intervals is offered to the policyholder within the policy tenure. Moreover, the life assured gets the remaining amount from the aggregate and the accumulated bonus on the plan's maturity if he/she survives after the completion of the policy duration. However, if the life assured dies before completing the policy term, the beneficiary is paid the entire sum assured, regardless of the previously paid instalments. It must be noted that it is one of the most expensive policy plans as returns are offered within the policy duration.
6. Retirement Plan
A retirement plan helps in income generation even after the life assured’s retirement. Regular pension benefits help achieve financial stability and independence from taking monetary help from children, friends or relatives. Moreover, if the life assured dies within the policy term, death benefits are offered to the nominee.
7. Child Insurance Plans
The savings-cum-investment plan helps secure your children's future by offering financial support and assistance for their education, personal and professional goals. You can purchase the plan when the child is born, and the savings can be withdrawn once the child reaches adulthood. Moreover, there are special provisions that help in making intermediate withdrawals during important occasions like marriage.
What Type of Life Insurance Should You Buy?
An appropriate insurance policy should be purchased according to your personal and professional requirements, your family’s current lifestyle and future goals. Moreover, your age, annual income, any pre-existing medical condition plays a vital role in selecting an appropriate policy for yourself. Thus, it is advisable to consult an insurance agent or a financial advisor to estimate sufficient life coverage and affordable additional benefits.
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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.