Life insurance can be defined as an agreement between you and your insurer that your family will be supported financially in case of your untimely demise.
The term “life insurance” encompasses different types of plans, namely term insurance plan, endowment plan, unit-linked plan, money back plan, child insurance plan, retirement plan etc. So, if you are wondering which life insurance plan will best suit the needs of your loved ones, we have an answer for you.
Different Types of Life Insurance Plans
A term plan is the only life insurance policy that not only provides the highest sum assured but is also very pocket-friendly. However, many insurance agents may discourage you from buying a term insurance plan saying that you will not receive any benefit unless you die. It is true that there is no maturity benefit offered at the end of a term plan, but the death benefit offered in case of your death during the tenure is higher than that offered by any other insurance plan available in the market. In other words, a term plan offers comprehensive life coverage at the most affordable premium rate.
You may also like to read: How Can You Save Money on Term Insurance?
Term with Return Of Premium (TROP)
TROP or Term with Return of Premium is a variant of term insurance plan. It is suitable for those who want to get their money back on the maturity of the policy tenure. TROPs are more expensive than simple term plans. However, you get no interest or bonus with the maturity benefit. Only, the entire amount of premium you had paid over the period of the policy term is refunded to you.
An endowment plan can be defined as a life insurance policy with the benefit of long-term savings. Though costlier than term insurance, an endowment plan allows you to receive the maturity benefit if you outlive the entire policy tenure. Moreover, many endowment plans offer final and reversionary bonuses along with the sum assured on maturity.
Money Back Plan
Money back plan is a type of life insurance plan that offers partial survival benefits periodically after every 3 or 4 years during the tenure of the policy. The remaining survival benefits are paid out (along with bonuses) if you outlive the tenure of the policy. In case of your untimely death, the full sum assured along with the survival benefits is payable to your nominee.
Whole Life Insurance
A whole life insurance plan, as the name suggests, is a type of policy that offer life coverage for your lifetime. In other words, you pay the premiums till the end of the term, but the policy continues even after the premium paying term is over. It covers your life till 100 years. In case of your death on or before your 100th birthday, your beneficiary receives the full sum assured along with bonuses (if any). However, if you survive till 100 years, you will receive the maturity benefit from the insurer.
Child Insurance Plan
A child insurance plan is a type of life insurance policy that allows you to save money for the future of your child. In case of your untimely demise, the premiums are waived off and your child receives the promised death benefit from the insurer. However, on maturity, your child again receives the sum assured as the maturity benefit. If you survive, there is no death benefit offered, but the maturity benefit is offered in periodic installments so that you can fulfill all your child’s future aspirations.
A life insurance plan that guarantees to take care of you financially in your old age when there is no other source of income is known as the retirement plan. A retirement or a pension plan is a type of savings cum insurance plan that offers both the maturity and the death benefit to you or to your loved ones.
ULIP or a Unit Linked Insurance Plan is a type of life insurance plan that offers the dual benefits of insurance and investment. ULIPs allow you to grow your money by making your investment market-linked, while giving you the benefits of life insurance simultaneously. At the end of the term you get the return on your investment. But in case of your unexpected death, your nominee receives the death benefit assured by the insurer.
Tips to Buy a Life Insurance Plan
Now that you know about different types of life insurance plans, next is to understand how to pick the most suitable plan for you. Always consider the following points before you buy any life insurance plan:
- Compare multiple life insurance quotes. Buying life insurance online will allow you to compare the various features offered by the plans.
- Stay away from insurance agents. They are often unscrupulous and push you to buy expensive plans in order to earn high commissions. Those plans may not be of any real benefit to you. Often, several cases of fraudulency are reported when a policy is bought through an agent. So, buying life insurance online is the best and the safest option.
- When you buy a life insurance, make sure you don’t over buy it. In other words, do not go for a plan the premium of which is too high for you to afford. You may end up getting your policy lapsed within a few years.
- Just like you must not be underinsured, similarly you need not be over insured. Term plans offer the highest sum assured at lowest premiums. Hence, you don’t need to buy multiple life insurance plans to enhance your protection. It is always advisable to buy a term plan with a few useful riders for additional coverage.
- Read the fine prints of the policy very carefully.
To Sum up!
The importance of life insurance is immeasurable. However, it is necessary to buy a plan that suits your needs. There are different types of life insurance plans available in the market. You should always consider buying life insurance online as it will give you the opportunity to do your research and compare multiple insurance quotes before buying. You should also compare the sum assured offered by the plans. In a nutshell, always buy a plan that makes you neither underinsured nor over-insured, but adequately insured.