The choice of the right insurance policy might vary from person to person, as what may suit you is a possibility for someone else; it is not. Hence, it becomes important to choose the perfect policy for yourself. Let us know some points that should be kept in mind while considering the right Life Insurance policy:
- Choose as per the Goal
One should have a clear perception of the objective and the reason why the policy is required. This is due to different policies available in the market that serve varied purposes.
- Consider the Sum Assured
The sum assured should be calculated depending on the family’s routine expenses. The golden rule which can be implemented here is to choose the sum assured, which is at least 10 times the annual income.
- Policy Term
Some policies help achieve the long-term objective, while others help in shorter ones. One should opt for a policy having multiple time frames.
- Riders
Riders can help enhance the sum assured, which may include the instances that a basic insurance policy does not cover. Hence, one should opt for a policy which has maximum riders.
- Check Information of the Company
Apart from the insurance policy, do proper research about the company providing the policy, where one can check regarding the claim settlement ratio, exclusions, solvency ratio, etc.
Different Types of Life Insurance Plans
Let us now go through different types of Life Insurance Plans:
| Name of Plan | Description |
| Term Life Insurance or Term Plan | Long-term pure financial protection plan for family |
| Whole Life Insurance | Provides life cover for the entire life or till 99 years of age. |
| Unit Linked Insurance Plan (ULIP) | Invest in a mix of diversified equity and debt funds with just a 5-year lock-in for partial withdrawals. |
| Endowment Plan | Surety of receiving the intended sum at maturity |
| Money Back Plan | Plan your cash flows for goals like child education and marriage. |
| Retirement Plan | Build a retirement corpus or build a pension for your golden years. |
| Child Insurance Plan | Invest in a child’s higher education and marriage goals under the safety of life cover. |
| Group Insurance Plan | Useful for corporates and other organisations to cover their employees and customers against unforeseen hazards |
| Savings & Investment Plans | Channelise your savings towards a future goal. |
Let us now discuss them one by one:
- Term Life Insurance or Term Plan
In this plan, beneficiaries of the term life insurance policy get death benefits in case the insured passes away during the tenure of the policy. It covers a huge amount with nominal premium rates, making it cheaper than other policies. In this policy, there are no maturity benefits due to them being a complete protection plan and not a savings one.
- Whole Life Insurance
In this plan, the policyholder gets covered until his/ her death. In the case of a participating policy, the premiums are higher, and dividends are paid out at regular intervals to the policyholders. On the other hand, in the case of a non-participating policy, the premium rates are lower, and the policyholder cannot avail of the dividend benefits.
- Unit Linked Insurance Plan (ULIP)
This plan is the most popular one as it involves dual benefits, i.e. investment and life insurance. Part of the premium paid is bifurcated towards insurance coverage, and the rest is directed towards a bunch of investment instruments, including debts, equity, and other securities. They are flexible and versatile in nature, as policyholders can easily switch their premiums between different funds.
- Endowment Plan
This policy covers both insurance and saving factors, aiming to provide maturity benefits to the insured. It provides benefits in the form of a lump sum payment at the end of policy tenure, even in case the claim is not made. They can further be classified into profit and without profit depending on policyholders’ appetite for risk.
- Money Back Plan
It provides a percentage of the total sum assured at some periodic intervals in the form of survival benefits to the policyholder. On maturity, the remaining amount of the sum assured is given to the policyholder. In case the policyholder dies, the dependents get the entire amount of the sum assured.
- Retirement Plan
This plan provides financial security once you are retired, as there is no regular income at that time. It asks for investment from you during your work period, and you are then sorted post-retirement as that amount will be your regular income stream afterwards.
- Child Insurance Plan
This plan is a savings cum investment plan providing financial security in case of an unfortunate death of the policyholder. It will take care of the future expenses of the child in the absence of the policyholder.
- Group Insurance Plan
This plan includes a minimum of 10 people under a single policy, including employers, corporates, banks, and other groups. Though employers would like to offer financial protection to the families of employees, banks and lending institutions target to keep the debt off the borrower’s family post-death.
- The plan under which the group is covered is known as the “Master Plan”.
- The policy gets issued to the group’s manager but will remain in the name of the group only.
- Savings & Investment Plans
Channelise your regular savings into long-term investment goals with this plan. It offers long coverage along with guaranteed maturity benefits. This allows you to plan your investments in such a way that your goals can be achieved smoothly.
Conclusion
While buying an insurance policy, one should remember his/ her responsibilities and future life goals. The insured should check the claim settlement ratio of the insurer for the last 5 years from whom the policy is to be purchased. Also, look for the premium amount, its due date, or any other information that would be required later on. The insured should be aware of the additional benefits before the insurance is bought. At last, the nominee should be aware of the location of the insurance documents and their credentials.
