Which Life Insurance Policy Type Should You Buy?
Life insurance coverage is a must to live a happy, carefree life. It is a vital piece of the puzzle that is financial planning. In layman’s terms, life insurance entails replacing your active monthly income in the event of your untimely death to secure your family financially.
There are many types of life insurance policies offered by insurers to match the different life goals of policyholders. It may appear confusing at first, but by carefully identifying the objectives serviced by these policies, you can obtain the best plan for your needs.
What Kind of Life Insurance Plan Is Best for You?
We discuss some of the most common types of life insurance policies companies offer to help you understand their benefits. As a result, you can make an informed selection based on your needs and goals.
- Term Life Plans
It is the most common type of life insurance coverage. The policyholder is covered for a set period under the plan. In the event of the policyholder’s untimely death, the nominee receives the specified death benefit. The following are some of the plan’s features:
- The plan provides comprehensive coverage for a low premium.
- It is conventional risk insurance with death benefits and no maturity benefits. However, some insurers provide maturity benefits if the policyholder outlives the policy tenure by returning the premium amount as a maturity benefit.
- The main objective of the policy is to secure the family’s future in the event of the policyholder’s death.
- A policyholder can boost their coverage by adding life insurance riders such as accidental death or child support etc.
- Whole Life Plans
The whole life policy protects the policyholder for the rest of his (up to 100 years) if the premium is paid on time. The policy has a cash value component in addition to the death benefit. In this case, the insurer invests a portion of the premium paid, which grows over time. A policyholder can borrow money against it through loans, pay for coverage, or even surrender this for cash to live a comfortable life post-retirement.
- Endowment Plans
It is a type of plan that provides policyholders with dual benefits of life insurance and savings. In addition to providing life cover, this type of life insurance policy allows you to save money regularly over a set period. The money is paid back in a lump sum at maturity. Along with the life cover benefit, the policy assists the insured in meeting long-term goals.
- ULIPs
One of the most popular types of insurance policy is ULIPs. This plan offers triple benefits to the policyholder. First, in addition to life insurance and investment benefits, the policyholder is entitled to get tax benefits under the IT Act. Second, it is the most flexible product, allowing you to customize your investment plan. A portion of the premium is paid to obtain life insurance, while the remainder is invested in debt or equity securities. Third, a policyholder can choose an investment according to their risk tolerance and investment horizon.
Which Life Insurance Is Right For You?
Since each person’s circumstances are different, thus, it’s essential to choose insurance that meets your needs and life goals. Some key points to consider while selecting a plan are:
- As we realize how various life insurance policies work, you must choose the product that is best suited to fulfil your aspirations.
- Look for insurance with a sufficient sum guaranteed to provide financial stability to your family in the event of your untimely demise.
- Compare multiple company’s plans to get the best one for you, with the lowest premium and the maximum coverage.
- Examine the policy exclusions and inclusions, additional riders, claim settlement percentage, and the company’s track record.
Buying a life insurance policy is a sensible choice to protect the interests of one’s family. Furthermore, with several policies accessible, you can choose the one that works best for your interests based on your goals and other considerations.