Even though human life cannot be calculated in monetary terms, it is important to keep your family/dependents safe from financial crisis in your absence. Life insurance is very important when it comes to saving for unexpected situations, for regular income after your retirement, for future plans of your children and for secondary source of income. Most of the financial advisors suggest that protecting your life and providing your dependents — on account of a sudden demise — is an unquestionable requirement before you focus around different parts of your monetary security. There's no question that compare to past generation, the present age is more conscious about their financial planning. People often consider every investment option to protect their near and dear ones, however neglect to think about the one vital part of monetary preparation — buying Life Insurance. Here we focus on all that you require to be aware of Life Insurance.
What is Life Insurance?
A life insurance is basically an agreement between an individual and a policy supplier/insurance company, where the organization pledge to pay a predefined amount of cash to the family or recipient of the person, in return of regular instalments over a period of time. These instalments are known as premium and are normally paid on a yearly basis. The person who purchases the insurance is known as the policy holder.
Life insurance ensures single sum amount to be paid to the family if the policyholder dies. Anyway, cash can't make up the hardship, it ensures no financial hiccups to the family even after the loss of the breadwinner of the family. The additional security system gives the really essential cover against peril and offers you astonishing opportunities to foster your hold supports It is moreover a fruitful device that engages you to set something to the side for future costs that could occur, similar to the high-level training or marriage of children. Insuring, the life of your dependents should be the topmost priority before planning any other financial aspects.
Looking for life insurance can be overwhelming, but choosing right type for yourself is very easy. Further in this article we will discuss about different types of life insurance.
Types of Life Insurance.
1. Term Life Insurance:
It is one of the common types of life insurance which provide income replacement for the dependents of the policyholder, if something happens to the holder during the tenor/term of the policy. In other words, it is a type of life insurance which provides death benefit to the beneficiary if the insured dies within a specified period. If the policyholder survives the term the policy amount gets forfeit.
2. Whole Life Insurance:
Whole life insurance policy is a type of insurance which provides the coverage throughout the life of the insured. It also has a cash value component which increases with the time. The benefit is provided to the beneficiary in case of loss, of policyholder.
3. Endowment Policy:
It is the most secured type of policy in which the insured gets the sum at the maturity of policy or the nominee otherwise. If the insured dies during the period of the policy, the nominee receives the sum assured or guaranteed benefits. Endowment policy provides double advantage of protection and savings for holders. The profit is paid for the time period for which the insured survives in the policy term.
4. Unit Linked Insurance Plan-ULIP:
In ULIP premium paid by the holder is used to purchase units of the investment scheme chosen by the investor/holder. This type of insurance provides the advantage of protection as well as investment. The cash value of the policy varies the as per the market situation of the particular investment.
5. Retirement Plan/Child Insurance Policy:
Retirement plan policies are designed to provide the income to the holder in the years of retirement. It allows the insured to pay the premium in the working years of the individual for the particular time period, which is paid out at end of the term of policy. Whereas, child insurance policy let the holder start their investments since the child is born till their adulthood for the education, marriage and other child’s future financial needs.
Benefits of Life Insurance:
· Life Cover- The biggest benefit of life insurance is, in case of any mishappening or sudden demise of policyholder, the company provides monetary compensation to the family of the diseased person.
· Accumulation of corpus- Apart from the life cover some policies allow investors to invest in the schemes of their choice to accumulate good corpus for their future needs.
· Tax Benefits- The premium paid and the sum received on maturity or death is exempt from the tax under section 80C. The actual tax benefits depend on the type of policy and premium paid on it.
· Guaranteed sum assured- Some policies provide the benefit of guaranteed sum assured to policyholder at the maturity apart from the term plan.
· Sound Financial Planning- Insurance policies provide protection the family of the insured and also helps in sound financial planning as per the specific requirement.
How to select right type of policy?
1. First the holder should categorize their mandatory and other debts to get a clear picture of their debt-to-income ratio.
2. Policyholder should set their goals and expectations before selection any kind of policy for themselves.
3. One should choose for the plan that can provide financial security to the family of the insured in absence of the holder without any hassle.
4. Before purchasing any policy, holder should clearly understand the plan’s inclusions/exclusions, claim settlement process, life coverage and conditions.
5. Compare plans of all good policy provider/company for better decision.
6. Always consult your financial advisor before any decision. At InvestoCafe, you can always seek any financial advice from the wealth management experts.
In today’s time people have thousands of options to choose from and often they focus on the investment part but forgets about the protection aspect, which is equally important. Whereas, the question of best policy concerned, there is no same perfect policy for all. Every individual has their own requirements, goals and needs, one should understand which policy suits them the most after taking expert advice. Go through all policy plans compare them and choose which specifically fulfil all your requirements.
Book free session to connect with experts at InvestoCafe for analysing your requirements and selecting best investment/Insurance scheme for yourself.