You must cherish your family because it is the most precious gift you can receive. Everyone would want loved ones to be taken care of both emotionally and financially, and you do everything possible to ensure this. If anything unexpected happens to you, you should take steps to protect your loved ones’ financial future, so they are protected and happy throughout their lives.
A life insurance policy is where the decision to purchase one is crucial. Your family can be protected from potential financial losses that may occur when you pass away as a result of life insurance benefits. Life insurance benefits are distributed to your family members to assist with debt repayment, paying for regular living expenses, and supporting various life goals.
Contracts relating to life insurance are contracts between insurance companies and their clients. Upon the untimely death of a life insured, the insurer pays a specified amount to the family of the policyholder following the terms of the policy. It is important to make sure you buy the right kind of life insurance policy to suit your financial needs since death is the only certainty in life.
Purpose of life insurance
- When you reach retirement age, critical illness protection becomes more important. In some policies, you might be covered from severe ailments such as cancer and heart attacks. Some of the world’s deadliest diseases can be prevented by purchasing these kinds of insurance policies.
- Building a safety net for your spouse and children becomes important if you have a family. You would want to protect your family from financial hardship in your absence. In addition, investing in life insurance can provide good returns.
- You can take advantage of some saving and investing plans in the early years of your career. Investment in equity and debt markets is possible with Unit-Linked Life Insurance Policies. Investing in a life insurance policy (which can be amended in the future) will also give you tax benefits.
- If you purchase a home or take out a loan during your working life, you tend to take on large amounts of debt. Our families can suffer grave economic consequences if we die while the loan is still due. In such a situation, it may be possible for a life insurance policy in India to be used to repay the loan.
Life Insurance Policies Types
Term Insurance Policy: Life insurance of this type is the simplest. It provides the family with a sum of money if you die during the insurance policy term. You will not receive any proceeds if you live through the term of the policy. But the premiums on this type of coverage are usually affordable. With just Rs. 1,000 per month, you can get a life insurance plan that provides close to 1 crore rupees of coverage with regular payouts over 40 years.
Non-participating Non-linked endowment plan: You define exactly how much your family will receive when you die and when the policy matures. It does not have any investment components and is not linked to investment returns. Depending on the situation, you know how much money you will receive in advance.
Non-Linked Participating Endowment Plan: Generally, these kinds of policies let you share in the profits made by the life insurance company. The policy pays your family a sum of money if you die, but if you live the term, you get an accumulated sum of money as well. Survival insurance payments or benefits are linked to the company’s profits.
Endowment Policies: In addition to term life insurance, endowment policies are also available. Participants, non-participants, and unit-linked can be divided into these three categories.
Unit Linked Life Insurance Policy (ULIP): When you die, you receive an amount, and if you live to maturity, you receive another amount. Unlike traditional participating policies, however, the maturity amount mostly depends on your investment choices instead of the company’s profit. Investments in your policy are made through funds, which are divided into units like mutual funds. Investment funds give you a lot of flexibility in choosing what your money will be invested in.
Best way to choose a life insurance policy
It is important to choose the right life insurance plan among the many available on the market. It is essential to look into a wide range of financial needs when choosing a life insurance plan. Here are some considerations to make while purchasing life insurance:
- Identify Your Financial Needs
It may not be appropriate for you to purchase a life insurance policy that suits your peers. You must therefore take into consideration your specific needs before comparing different plans, whether it is affordability, sum assured, or riders.
- Understanding Life Insurance Types
When people don’t understand how life insurance works, they can’t make an informed decision about whether to buy it. To make the right choice of life insurance product, one needs to understand the various types available.
- Compare the benefits of plans
Many types of life insurance plans are available today, so it is important to select one that offers adequate coverage. Ideally, you should compare several parameters such as the premium, the sum assured, and the investment component, if any, to determine which plan is most suitable for you.
A life insurance plan can accommodate every financial objective. To protecting loved ones against financial risks, term insurance is the best choice. Life insurance plans that cover the life assured for their whole lives are known as whole life insurance plans. A unit-linked insurance plan (ULIP) is a good choice for those interested in insurance and investment opportunities. An endowment plan gives you the security of insurance and the convenience of savings. Money-back plans offer periodic returns through insurance coverage. If you want to help your child meet his or her life goals, such as education, marriage, or career, a child plan may be the best choice. Invest in a retirement plan so to retire gracefully.