Which Policy Type Should You Choose?

Intro: With multiple categories of insurance plans available, choosing a category that matches your needs will allow you to realise the policy benefits to the maximum.  Read on to know how you can match your need with an ideal category.

Consider this scenario: You wish to buy an insurance policy that will give you a large cover at minimal costs. Or, you wish to secure your child’s future. Or, you wish to build long term savings through market linked returns with an insurance cover. Bearing in mind such different needs, life insurance companies offer multiple products, each designed to meet a specific need.

Benefit Of Choosing A Tailored Product

By choosing a product category that matches your need, you can be rest assured that your need will enjoy the safety net offered by life insurance, and, therefore, will be met in case of all eventualities.

Broad Insurance Categories

Though each product category has multiple policies, all policies can be broadly categorised as follows:

Term plans

• Enjoy a large insurance cover at minimal costs.
• In case of death during the term policy, your dependents will receive the policy sum assured.
• If you outlive the policy term, you are not entitled to receive anything.

Endowment plans

• Enjoy protection and savings.
• On maturity or death, the policy pays out the sum assured plus accumulated bonuses.

Whole life plans

• Enjoy life cover throughout your lifetime.
• On death, your dependents will receive the policy sum assured plus accumulated bonuses.

Money-back plans

• Receive periodic payouts for meeting financial commitments at key stages in life.
• On death during the policy term, your dependents will receive the policy sum assured plus bonuses. Remember, earlier payouts received are not deducted.

 Unit Linked Insurance Plans (ULIPs)

• Enjoy market linked returns and speed up the wealth creation process.
• A portion of the premium paid is towards the insurance cover while the remaining is invested in an investment fund of your choice.
• On death or maturity, depending on the plan features, the payout includes higher of the policy sum assured and fund value or both.

Pension plans

• Build a corpus for your retirement that will allow you to enjoy financial independence.
• Based on the frequency of your choice, receive a regular stream of income from the same.

Child plans

• Secure your child’s future even in your absence.
• Receive periodic payments that will give you financial support when your child reaches his/her milestones.
• On death of the parent, in most cases the basic sum assured is paid, future premiums waived and the periodic payments continued to be made as per the plan.

Loan protection plans

• Secure your loan liabilities under all circumstances.
• On completion of the loan repayment, the insurance cover ceases or can be easily surrendered, depending on the plan terms.
• In case of death/total and permanent disability during the policy term, the policy proceeds can be utilised to settle the outstanding loan amount.

 End note

Before you buy any plan…

1) Ask yourself do you need insurance?

2) If “Yes”, how much cover? The cover will depend on your needs and your premium paying capacity. Choose a premium amount that you can comfortably pay over the policy term.

3) Finally, ask why you need insurance? Once the specific need is clear, pick a category that best serves your need.

4) The policies available within the chosen category will be the right policy for you.