Insurance seems to be a complicated financial product to most of the people as they don’t want to understand the simpler details of it. But in reality, it is one of the most beneficial financial products that anybody can own to safeguard their future from any financial losses. Insurance provides protection against financial losses whether huge or mere. Life insurance is mandatory for every individual especially the for the bread earner of the family, as any mishap with him or she can cause a great deal of financial as well as other problems to the family.
Need for insurance
Life insurance policies hedge the risk of financial losses due to the demise of the insured person and provide a specific amount (insured amount) to the family after they claim the money. Though money cannot compensate the loss of the person but atleast it can help the family to survive the rough days.
In India, the insurance penetration rate is near about 3.4% as per the latest report of the IRDAI. It is advised to combine few atleast 2-3 different types of insurance policies plans together to get the ultimate security and benefit.
Types of Life Insurances in India
It is an insurance plan which provides life coverage for a particular time period and the death benefit is payable to the nominee if the insured person expires within the term of the plan. There is a specific amount of money which is insured under this plan and payable in case of death or other uncertainty of the insured person so that the family can survive without much financial obstacle. It is designed according to the basic financial needs of any family.
The premium of term insurance policies is the lowest amongst all types of life insurance policies because there is no maturity or survival benefit. The entire amount of premium goes into reimbursement of the policy if the insured person expires before maturity of the policy. Moreover, the premium is lesser because there is no investment component attached to this plan.
- Decreasing term plan: This plan is unique from all the types of life insurance policies as the policy amount or payout amount decreases over the years or on monthly basis. It also provides a death benefit to the insured and his family but the payout amount decreases at a rate which is determined at the beginning of the policy. This insurance plan can help getting rid of any loan burden after the demise of the insured person like a home loan.
Whole Life Plan
This is the basic form of a cash-value type of life insurance where investment component is involved. Whole Life policy offers the life coverage till the life insured turns 99 or 100 years of age. The investment component helps in accumulation of cash flows over years during the period of the plan which can be withdrawn by the insured person or he can also borrow money keeping the insurance policy as a mortgage. The insurance component of the policy helps in mitigating the risk of financial loss from the death or any uncertainty of the insured person.
Ulips offer you the dual benefit of life insurance plus investment. Under this plan, the investment steering is in your hands which help you to decide the type of investment where you want to put in your money for accumulated growth. The investment option can be chosen as per your risk appetite like for higher risk bearing capabilities you may invest in equity based fund and for lower risk bearing capabilities you may choose debt based fund or a combination of both. The investment plan allows you to build a robust corpus to meet your future financial goals along with providing financial protection to your loved ones in case of your unfortunate death during the policy term.
After retirement to be financially independent, pension plan life insurance can help a lot. It provides steady and regular income flow to the insured and hid family after he retires. It is a different type of life insurance which helps the insured live life peacefully and without depending on other’s income after retirement.
It is more of a saving instrument along with life coverage benefit. Endowment plan is for them who wants a steady saving which is less risky than other investments but provides assured income generation. The premium amount is lower on this plan but it is the most beneficial if you consider a safe investment. If the insured person dies within the period of the policy, the nominee gets insured amount. If the policy matures, insured get the sum which was assured along with bonus (if applicable).
Need for diversification
It is always advised not to keep all the eggs in one basket. If you just have one term insurance you can miss out on the opportunity of saving and have a steady cash flow. To have a perfect financial safety, you must diversify the investment in insurance by buying different types of insurance policies.
Insurance not only provide life cover but also regular savings and helps in cash flow generation. A mix of these Compare Insurance Plans can help in optimizing the benefit from individual plan and help is attaining a great deal of financial safety.