Which Life Insurance Policy should I opt for?




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Many of us are often found in a confused state of mind when it comes to selecting the best life insurance policy in India! Especially, if you are looking out for an investment, saving tax or planning your child’s future. Before even narrowing down your search, it is important to understand why it is necessary to buy a “Life Insurance” policy.

Well, life insurance means you transfer all your risks and liabilities to the insurance company. For which, you pay an annual premium for the type of life insurance policy you opt for. Some people consider life insurance as an instrument to save tax, while others take it as an investment objective. But, many of us even forget the ‘protection’ that life insurance policy offers during uncertainties.

For your dependents to lead a tension-free life post your demise, it is important that you invest in a right life insurance policy!

life insurance

Questions like, ‘Who will clear off my bank loans and other outstanding?’

‘How will my dependents survive post my demise?’

‘Who will bear the household expenses?’

‘How will my children take care of their education & tuition fees?

These all questions pop-up your mind when you think about a bitter reality, “DEATH”.
Even if you plan of buying a life insurance policy, would all these requirements be taken care off?

Well, there are different life insurance policies for different purposes.
Let us understand each of them in a better way.

life insurance

Types of Life Insurance Policies

1. Term Insurance
These are pure protection plans that take care of risks due to sudden death. The insurance company pays a lump sum amount to your beneficiary if you die within the policy period. However, if you outlive the policy period, you do not get any death benefit. Term insurance should be opted at an early age. The premiums here are low. There are 2 popular types of term plans:

a. Level term plan
Here, the sum assured remains unchanged for the entire term. For instance, during the policy commencement you decide to opt for a 40 lakhs sum assured, then your nominee would be compensated with the same sum assured of Rs.40 lakhs after your death during the policy period.

b. Decreasing term plan
If you have a housing loan or a loan against property, a decreasing term plan would be a good option. Here, the sum assured remains in line with the balance amount of your housing loan. Your cover decreases as your outstanding housing loan amount decreases.

2. Whole life insurance
Here, you are covered for your entire life. However, you need to pay the premiums regularly until you die. If death occurs, the insurance company pays the entire sum assured to your nominee.

3. Endowment plan
Here, the insurance company pays the sum assured during both death and survival. The premiums of endowment plans are relatively higher because your funds are further invested in asset market both in equity as well as debt markets.

4. Money back policy
These plans help you in systematically investing your finances. You get guaranteed returns at regular intervals. This plan is a three-in-one combination of tax benefits, bonuses, insurance cover and a regular income.

life insurance
From above of man and woman with contract of life insurance policy sitting at table

5. Unit linked plans
These are hybrid plans, which are a mixture of mutual funds and term insurance plan. They are subject to market risks. You need to select the allocation of the investments directly from the stock markets. If death occurs, your nominee gets the sum assured from the insurance company.

6. Retirement plans/pension plans
Even though you have enough savings to lead a happy retirement life, having a pension plan is nonetheless important. Buying the best pension plan would help you secure your savings and most importantly, help to meet your financial expectations post retirement. Once you retire you get a regular flow of income, which is monthly in the form of pension.
It is better you make provisions at an early age for your family to live a secured life. Buy a life insurance policy that best suits your requirement and then opt for it. Analyze and compare different policies and then narrow down your search on the most suitable plan. Do not be in haste while zeroing on your life insurance policy. Because, “Haste leads to Waste”.

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