While you are taking all necessary steps to meet your family members’ emotional requirements, it is as crucial to consider their financial needs. A life insurance policy provides for your loved ones’ financial requirements in the event of your untimely death. Life insurance proceeds may be used to pay off debts, meet costs, and fulfil life objectives. However, before purchasing a life insurance policy, consider your financial requirements to determine the appropriate coverage level.
Types of Life Insurance Plans in India To Live a Care-free Life
In India, there are many types of life insurance policies available, as detailed below:
1. Term Insurance Plans
This form of term insurance plan assists your family in becoming financially independent after the absence of a loved one. Term insurance plans, often known as the ‘Pure Protection Plan,’ are the most basic kind of whole life insurance policy.
These plans provide the amount insured to family members in the case of the policyholder’s untimely death during the policy term. This policy offers to provide comprehensive insurance coverage for a low price.
2. Unit-Linked Insurance Plans (ULIPs)
A Unit-Linked Insurance Plan (ULIP) is both an insurance and an investment. This policy provides a death benefit, which means that it pays an amount to the nominee upon the death of the insured, and if the policyholder survives the period of the ULIP, he or she may also receive the ULIP’s maturity value. This insurance combines the advantages of protection and savings into a single plan.
3. Endowment Plans
An Endowment Plan offers life insurance as well as the option for the policyholder to invest their money for a certain length of time. It is a form of insurance policy that combines life insurance protection, maturity benefits, and tax advantages. It is a sort of whole life insurance that serves the dual objective of being a solid financial instrument as well as providing life coverage.
4. Whole Life Insurance Plans
Whole life insurance policies are in effect till the insured dies. These regulations have no time limit. Whole life insurance is sometimes known as “Permanent Life Insurance” since it has larger premiums than any other kind of life insurance plan. Premiums for whole life insurance policies are set based on the age of issue and do not grow with age.
5. Child Plans
Kid plans offer the dual goal of providing insurance as well as the ability for a person to invest in the future of a child. This plan gives a lump sum payment at the conclusion of the policy term that may be used to help pay for your child’s schooling or marriage expenditures.
6. Retirement Plans
Retirement plans are one kind of insurance plan that provides the policyholder with life insurance and helps them amass funds over time. This strategy aids in the creation of a regular income after retirement for any financial needs that may arise.
7. Money-Back Plans
Money-Back plans offer whole life insurance to policyholders during the policy term and also give maturity rewards in instalments as survival benefits after predetermined time periods. These policies promise to pay the full sum guaranteed amount in the event of the policyholder’s premature death without subtracting the amount paid as survival benefits.
How to Choose the Right Life Insurance Plan?
Before investing in a life insurance policy, you must choose one that meets your insurance needs while remaining within your budget. The following are some pointers to consider while selecting a life insurance policy for yourself:
1. Identify the Type of Life Insurance Policy you Need
There are numerous kinds of life insurance plans available in the market, including pure protection plans, which offer financial protection to the life assured’s family in the event of the life assured’s untimely death within the policy duration.
Other plans are savings and insurance plans, which give an investment opportunity as well as financial security to the life assured’s family in the event of the life assured’s untimely death during the policy term. One may choose a life insurance plan based on their insurance needs and budget.
2. Sum Assured/Coverage Amount
Before acquiring a whole life insurance policy, you must first establish the coverage amount/sum guaranteed. It is recommended that you contemplate an amount guaranteed that is 10-15 times your annual income.
Before settling on a sum guaranteed, think about your existing lifestyle, spending, obligations, the number of financial dependents and their expenses, and so forth. A life insurance policy’s amount guaranteed should be sufficient to cover your family’s needs in the event of your untimely death.
3. Incurred Claim Settlement Ratio
The incurred claim settlement ratio is an extremely important element to consider when obtaining a life insurance policy. In tough circumstances, a life insurance company with a high claim settlement ratio may be completely dependent on it.
A life insurance policy issued by an insurance provider with a high claim settlement ratio is recommended since a high claim settlement ratio reflects the insurance company’s reputation.
4. Compare Several Plans
Compare the plans given by various insurance companies before acquiring a life insurance policy. It will assist you in determining which plan provides what and if it meets your needs within your budget.
Comparing plans allows you to make an educated choice and choose a plan that meets your needs while staying within your budget. Only after comparing numerous plans can a person get the best life insurance policy.
5. Add Suitable Riders
There are several rider alternatives on the market, including Accidental Death Benefit, Accidental Total and Permanent Disability, Critical Illness, Waiver of Premium, Income Benefit Rider, Term Rider, and so on.
Different riders serve different objectives; it is recommended that you obtain a rider that is appropriate for your life insurance policy. It is also recommended that you should not add too many riders to your life insurance policy.
Wrapping It Up
A life insurance policy is often regarded as one of the most crucial prerequisites for living a pleasant, trouble-free life.
A life insurance policy not only ensures that one’s dependents will be adequately taken care of even if they are no longer alive, but it may also help to develop a sizeable corpus to meet one’s future financial objectives.
One of its key advantages is the wide range of whole life insurance plans and policies available to potential clients. Individuals may choose their favourite plan depending on their own needs.
