Life insurance plans to consider if applying for the first time

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There are a variety of life insurance plans. All of these plans have their features and benefits. It’s important to choose the plan that works best for you. Several factors can influence your decision. The main reason to buy life insurance is to protect your family and dependents against your premature death. Therefore, using this as a rule of thumb, select the policy that meets your financial goals.

Let’s take a look at the different types of life insurance policies available in the market and see how each might be right for you.

Term insurance plans

Term life insurance plans are basic plans that guarantee your life against sudden death for any reason. This life cover is provided for a certain period or duration. Premiums are low and it’s simple life coverage with variable terms ranging from 5 years to 40 years, depending on what you want. Additional riders can also be added to an existing life insurance plan. This can help the family overcome serious financial difficulties. These endorsements/add-ons mean a little extra premium, but the benefits are huge. Therefore, a term life insurance plan is something that everyone must have in their financial portfolio. Note that term plans offer no benefit at maturity. In some cases, you can recoup the premiums by surviving the term of the policy, but that’s it.

ULIP or unit-linked insurance plans

ULIP is a dual benefit policy. It offers both the benefits of life insurance and an investment vehicle. The premiums you pay are split into two parts, one part covers life insurance and the other is used to invest in market-linked mutual funds. The amount of premium to be paid for each depends on the policyholder’s decision.

Investments made by insurance companies on behalf of investors in a diversified pool of funds can be classified as follows:

  • Low-risk, low-gain investments: These are usually debt-based mutual funds, or a mix of stocks and debt, called balanced funds.
  • High-risk, high-reward investments: These are usually stock-based mutual funds.

You need to decide where your investment will be made. If you have a risk appetite, you can opt for the high risk, high gain investment plan. However, if you don’t want to take any risk, go for the low risk, low gain plan. Either way, the investments made by the insurance company will pay off for you. You don’t have to worry about where and when investments should be made. The insurance company has experts who will take care of this for you. You also have the benefit of moving your investment funds from low risk to high risk or vice versa. The other benefit is that ULIP plan maturity values ​​are exempt from income tax subject to Sec. 10 (10D) of the Income Tax Act. The life insurance portion acts just like a typical life insurance plan.

ULIPs can be modified to serve multiple purposes. You can use them as children’s plans or retirement plans at your convenience.

Endowment Insurance Plan

This type of plan is for people who want a guaranteed return on their investment. It is for a fixed term, and at maturity, the insured gets back the sum insured with an additional premium. The tax advantage is the same as for the ULIP plan. In the unfortunate event of the death of the policyholder before the due date, the sum insured and any accumulated bonuses are paid out to the applicants.

Reimbursement insurance plan

In a reimbursement insurance plan, the insured recovers a certain portion of the sum insured at a fixed and regular interval. In this plan, one can reap the benefits of the savings you get by paying premiums in a short period of time instead of having to wait for the policy to mature. The life insurance part is the usual part, and in the event of the premature death of the insured, the insurance company will make the payment on the policy.

Whole life plan

In a whole life insurance plan, the policy will remain active for the lifetime of the policyholder. This policy can be taken out for terms of 65 to 99 years. Essentially, this type of policy is purchased by people who know they have dependents even in old age. This policy provides a cushion for dependents upon the death of the insured. This is usually quite a large sum due to the long duration of the policy.

Pension insurance scheme

It is basically a life insurance plan and it needs to be started early for the term to be long. There are clauses that guarantee a certain yield at maturity. It is possible to withdraw the amount at maturity monthly, like an annuity, or to withdraw the entire amount in a single payment. The decision rests entirely with the insured.

Before deciding to go with any plan, it is best to understand some aspects. The first is, what premium is affordable? This means how many premiums can be paid each year. To calculate it, it is best to use a life insurance calculator. This free software allows you to calculate the premium for any sum insured. You must enter the desired sum insured, the duration and some personal data. That’s all. The calculator will tell you what premium must be paid annually.

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