Types of Life Insurance Policies – Which Is Right for You?
Thursday, May 16, 2019, 6:00 AM | Leave Comment
Life Insurance Sector has come of age. With so many nationalized and private insurance players that are the part of this sector, the growth has increased manifold and so has the outlook of people towards it. People have become aware of which policy would fit them.
The realization pertaining to various life insurance policies as well as their effectiveness in one’s life has become a talking point these days. Many advertisement commercials that float across various modes of media talk about insurance role in ones and how important it has become at a time when we lead such a strenuous life.
There are various types of life insurance policies that are available today from private as well as nationalized players. These policies either may be similar or may also differ on the basis of the tenure and the returns that they offer. In India, these companies are regulated by the IRDA i.e. the Insurance Regulatory & Development Authority.
This body makes sure that the working of the insurance company is constantly monitored and no deviation takes place from what is being directed to them. It also makes sure that the policies should be easily understandable and user-friendly.
There should not be any gap between what is being offered on paper and what is finally delivered to the policyholder. The user, in this case, the prospect for the insurance company just needs to make sure that the insurance policy is beneficial and gives a very attractive return.
There are various types of Life Insurance Policies that are available in the country. They are mainly:
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Term Insurance Policy
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Money Back Policy
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Unit Liked Investment Policy
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Pension Policy
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Whole Life Policy
Term Insurance Policy is one of the most preferred policies in the country today. These policies secure the future of the immediate family or the nominee if in case something happens to the policyholder. At a time when there is an absence of the breadwinner of the family, this insurance gives a great sigh of relief to the family members as financial requirements are immediately taken care of.
In addition to the sum assured who is given, this policy also helps in getting tax benefits to the policyholder. As far as the costing part is concerned, these policies are cheaper as compared to other policies and hence give another reason for people to avail them.
Then there is Money Back Policy that keeps on paying a fixed amount to the policyholder across the tenure. In case if the policyholder passes away then the beneficiary gets the sum assured.
ULIP or Unit Linked Investment Policies are the ones where part of the premium paid goes in the monthly cover and the other part is invested in either equity or debt funds. They are as similar as type of mutual funds but the major point of difference is that they provide life insurance as well.
Pension Policies have become one of most talking points today with insurance companies advertising it a lot. Financial dependence post-retirement is what people have started to think about and one needs to take this aspect pretty seriously.
Finally, there is a Whole Life Policy wherein there is no particular tenure which is associated with the policy and the premium is to be paid for the entire life. The policyholder, in this case, enjoys the benefits floated by the policy for a lifetime.
Life Insurance has become very important these days. The lifestyle of people and the strain which one goes through makes a person always feel uncertain about the future. It hence becomes imperative for a person to choose the right type of policy which suits his requirement. Person availing insurance should always look into the fact that he chooses the right type of policy in the first place itself. How to zero in on the right policy is what needs to be looked into.
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Need-Based Buying
Always ensure that the policy you are opting for is your need and your buying decision is not based on what others have said about that particular policy. Each individual has his own criteria as far as the selection of policy goes and one should let it be that way. You might get influenced by someone during the policy buying process but over a period of time, you might start to realize that the policy you chose was not apt for you.
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Compare Premiums
Before buying the most suitable policy, make sure to compare the premiums. It may happen that the premium which you are going to be paying for one policy from a particular company may differ from some other company. So one has to be wise in selecting the right policy.
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Set a Goal
If you have opted for life insurance for yourself and family, this itself means that you have a goal in mind. Always be clear on that. Decide for yourself the tenure at the end of which you would require funds. It may be related to anything; child’s education or full settlement of the mortgage etc. The policy should always be taken considering such long term goals in mind.
Term Life Insurance is mostly preferred nowadays. The person buying it knows that it is a long term policy and decides on it considering a lot many factors. It is well to be noted that apart from the financial security and the returns that one gets out of it, the policy is beneficial from tax benefit point of view as well.
On the other hand, the whole life insurance policy is valuable for those who look out for security for their entire life. There is a particular rate which is locked-in and one has to adhere to it throughout the span.
When it comes to the customer experience or for that matter track record of the insurer, one should always look into the settlement ratio of the company. All the information pertaining to it can be extracted from the internet. If an insurance company’s settlement ratio is on the higher side, it should always be given preference vis-à-vis others.
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Jitendra Pandit a content writer with interests in investment and Finance. He runs a Finance blog named Money Visual Finance to help people to prepare fruitful investment plan for future. He loves Belgian chocolates and Swiss watches and he spends his free time wandering around the world. He specializes in email marketing and copy-writing, and loves glossing over oddities around the world.
