In today’s troubling times, it has become crucial to safeguard one’s financial future and help loved ones become financially independent even in the face of emergencies. Since safeguarding the future and building a reliable corpus go hand-in-hand, having comprehensive life insurance can come in handy. Such a plan does not just act as a safety net during unforeseen situations but also helps individuals grow their wealth and meet financial goals. Until the last decade, insurance was not a priority in financial plans and often got lost amid the galore of savings plans and investment options pushed by family or peddled by agents. However, with changing times individuals are becoming more aware of the role of insurance in ensuring financial security, making it a key component of financial plans. This is because individuals now have begun to recognize the role it plays in safeguarding the future and promoting financial security. However, with the availability of multiple life insurance options in the market, individuals who are navigating them are bound to feel overwhelmed. Individuals can simplify the whole process by simply identifying their personal requirements and then looking for plans that help fill the gaps.
To give you the required jump start, let’s discuss the different types of life insurance plans and understand their benefits in brief.
1. Term Insurance
This life insurance policy helps individuals build a financial safety net for their family members for a set period. Typically, In exchange for a premium amount, the insurer extends a sum assured to the beneficiary in case the insured is met with an unforeseen event covered by the insurance. Notably, the coverage and premium amount depends on several factors, including the health and age of the insured. Individuals can use a term insurance premium calculator to determine the estimated premium and cover and plan their finances accordingly. In case of sudden death of the insured, the coverage helps the beneficiary deal with the existing debts and expenses, allowing them to take care of their obligations without straining their limited budget.
2. Critical Illness
Individuals can protect themselves from the financial burden of critical illnesses with this insurance plan. Such a plan covers a wide range of serious health disorders such as respiratory illnesses, cancer, cardiac disorders, etc., listed in the insurance policy document. Typically, when an individual gets diagnosed with an illness covered under the plan, the insurer pays the insured with a lump sum, enabling them to meet the expenses of the treatment and focus on their recovery. However, to avail of the coverage individuals must be honest about their pre-existing health conditions during their application process. Having an illness will increase the insurance premium. However, being transparent about one’s condition will ensure that the claim does not get denied in the hour of need on the pretext of health conditions. Regardless, to assess the company’s reliability, individuals should check their insurance claim settlement ratio of a year. Typically, a high ratio suggests that the track record of the insurer is clean when it comes to supporting their customers.
3. Investment Plans
Unit-Linked Insurance Plan: This insurance plan offers security and the opportunity to grow one’s wealth. By allowing Investment in different instruments, such as debt, equity, or both, individuals can make the most of their returns potential. ULIPs allow individuals to reallocate assets in their portfolio and invest in them depending on their risk appetite. This helps them to protect their capital against market fluctuations by spreading out the impact across the portfolio. Individuals also have the flexibility to withdraw their funds in units or switch between different options as their financial goals and needs evolve, ensuring their resources keep generating the best returns.
Endowment plans: These plans are different from ULIPs as they offer the insured guaranteed returns that are not market-linked ones. This makes endowment plans ideal for individuals who seek insurance’s protection aspect and predictable growth on their portfolio. In this insurance, the premium gets split into two parts – one part goes toward their payouts, and the remainder goes toward their life cover. If the insured is faced with a fatal accident or sudden death, their dependents will receive a death benefit from the insurance company. However, if the insured survives the insurance term, they will receive an insurance maturity benefit, like a survival bonus from the insurer. This stability aspect makes endowment plans quite popular among salaried individuals who aim to save for their long-term goals like retirement and for safeguarding their families’ future.
4. Child Plans
Individuals often resort to this life insurance plan to build the future of their children. Typically, child plans allow individuals to save up for the future for specific goals such as college tuition for their parents or their first international relocation for a career, etc. This way the insurance helps mobilize a part of an individual’s savings over a term that they will access at a pre-specified time. These plans also have an inbuilt insurance aspect that takes care of the child’s financial future in the absence of the insured parent.
5. Retirement Plans
Insurance plans that facilitate retirement planning are ideal for individuals who plan to retire early. These plans are designed to help individuals take charge of their finances and plan their retirement by mobilizing savings towards retirement plans. These plans offer guaranteed returns on their premium and ensure capital protection. Individuals have the flexibility to choose how they want to pay the returns in a lump sum or as a regular stream of income based on their needs or requirements. However, individuals should compare the retirement plans and their offerings to understand which insurance plan is suitable for them.
These are the most popular life insurance plans that will help meet different requirements while extending financial protection. However, the success of the plan depends on its features, exclusions, and the claim settlement ratio of the plan. Those who intend to get an insurance plan should compare different insurer’s offerings to understand which one suits them the best. Having an idea of one’s requirements and market offerings will help one to make an informed choice and pick a plan.