In unpredictable events, the main priority is the well-being of the loved ones. For them to be able to manage the cost of living without the risk of financial uncertainty in your absence is something you should take care of. While the savings that you may leave behind will help them sustain the effects of inflation, merely savings cannot help them have a financially secure future.
One way you can provide them with a financial safety net is by investing in life insurance. There are different life insurance plans available in the market for you to choose from. Which plan would be suitable for you? Read more to find out.
What is life insurance?
In simple terms, life insurance is a type of policy that provides financial assistance to your loved ones from life risks in your absence. When you purchase life insurance, you and the insurer get into an agreement. As per this agreement, if you were to pass away during the policy term, the insurer will financially compensate your family. The term and the sum assured depends on the type of policy you purchase.
What are the benefits?
The following are the benefits of life insurance:
- Financial support for your loved ones in your absence
- Tax benefits on the premium and sum assured
- Better chances of clearing outstanding loans/debts
- Help for planning the future of your children/partner
- Leaving behind a legacy for the future generation
What are its types?
The following are the life insurance plans that you can choose from:
- Term insurance plan
In this policy, the insured gets financial protection for a specified term. There are different term options that you can select from as per your requirement. It is advised to opt for a longer duration for better coverage. Once the policy lapses, the financial protection you get also ends. If you as the policyholder were to pass away during the term of your policy, the insurer will compensate your family. However, if you survive the policy term, there are no maturity benefits at the end of the term.
- Unit linked insurance plan (ULIP)
A ULIP is a policy in which the policyholder gets the dual benefits of investment and insurance in the same policy. The premium that you pay for the policy is used for both. This policy is aimed at those who want to increase their savings by investing in equity and debt markets. When investing in this policy, it is advised to stay invested in it for a longer duration to enjoy greater returns. The family of the policyholder gets life protection cover from life risks. Either the policyholder or their family would receive the maturity benefits from this plan.
- Endowment plan
Endowment plans are similar to ULIPs. They also provide dual benefits of investment and insurance to the policyholder. However, while the returns in ULIPs are dependent on the nature of the market and its impact on the investment, returns are guaranteed in endowment plans due to the lower risk factor.
- Whole life insurance
Whole life insurance financially protects you and your loved ones for the entire duration until you are alive. Term insurance provides protection only till a specific term. However, a whole life plan does not have any such specified limit. For example, if you buy this insurance and you were to live till the age of 82, the policy will provide financial coverage till that age. There is a cash value component in this policy that keeps increasing every year. You also have the option of making partial withdrawals like in ULIPs.
- Group life insurance
This type of insurance is generally provided in workspaces by the employer to the employees. In this policy, the financial coverage is not limited to just the employees, but it also extends to the family of the employees. The range of organisations and the type of people who can be covered under this policy is extensive.
These are the different types of plans that you can select from if you are looking to purchase life insurance policy. You can also use the life insurance premium calculator to see how much your policy would cost your based on your requirements.