With growing age comes different responsibilities and goals that you wish to take care of while you are present. However, unfortunate circumstances can cause problems for you and your loved ones. The financial cost of it being one of them. While you might not be able to predict an emergency, you can be financially prepared to deal with its aftermath. This can be done by having a life insurance. What is life insurance? What are the types of life insurance? Here is more information related to it.
Understanding life insurance
A life insurance policy financially protects the policyholder and their loved ones from different life risks. When you purchase a life insurance, you get into an agreement with the insurance company. As per the agreement, your family would be compensated by the insurer if something unfortunate were to happen to you. The sum assured that is given to the nominee is based as per the agreement at the time of the purchase of the policy. The amount helps in managing the cost of living and set aside some amount for future goals.
Types of life insurance
The following are the types of life insurance policy that you can choose from:
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Term insurance plan
When you purchase this policy, you and your loved ones get life cover for the term specified under the policy. There are different term options available that can match your requirements. Opting for a policy with a longer term might offer sufficient coverage. The financial protection offered under the policy lasts only till the specified term. If something unfortunate were to happen during the policy term, your family would be compensated by the insurer. As there are no survival benefits provided under this plan, you would not get benefits if you survive the term of your plan.
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Unit linked insurance plan (ULIP)
A plan that provides dual benefits of investment and insurance to the policyholder is known as a ULIP. The premium paid for the plan is used to finance both the components. This policy is aimed at those who want to increase their investment in equity and debt market. The longer you stay invested in the plan, the higher would be your returns. with the power of compounding. The family of the policyholder is provided with a life protection cover from life risks. If something unfortunate were to happen during the plan’s term, the family would be compensated with death benefit. If you were to survive the term of your plan, you would get to enjoy the maturity benefits from the plan.
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Endowment plan
Endowment plans are similar to ULIPs. They also provide dual benefits of saving and insurance to the policyholder. As ULIPs invest in both equity and debt markets, the risk factor is balanced. On the other hand, endowment plans mainly focus on debt markets, so the risk factor is comparatively low.
This plan provides financial protection to you and your loved ones for whole life, i.e., till you are alive. While term insurance provides protection only till a specific term, a whole life plan does not have any such specified limit. One of the benefits of this plan is the cash value component, which keeps increasing every year. The plan allows you to make partial withdrawals, similar to ULIPs.
How to select the correct insurance?
Various factors come into play when looking to select the correct policy. Age, family members, future goals and medical condition are important factors that you must consider before selecting a policy. Always be sure about your requirements and see which policy meets them. Do not purchase a policy in haste as it would be a waste of money.
Conclusion
These are some of the types of life plans that you can consider buying to provide overall protection to yourself and your loved ones from life risks. Before you purchase a policy, however, use the life insurance premium calculator. The calculator allows you to see how much the policy would cost as per your needs, which would assist you selecting the right plan.
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