Looking for Investing in a Life Insurance product? But not sure exactly how it works?
Well, this page is aimed to give you a complete understanding of how it works and what you need to understand to choose the products that suit you the best. As at every life stage, everyone has a set of primary needs that requires sufficient funds to fulfill them. This is where life insurance comes into the picture- as it offers tailor-made products to cover every aspect at different stages of life.
There is no doubt that life insurance is a must-have for everyone. Hence it's very crucial to have a complete understanding of the value a life insurance policy can bring in to your life and that of your loved ones.
A life insurance policy is actually a contract with an insurance company. A lump sum amount is provided, in exchange for premium payments, known as the death benefits, to the nominees or beneficiaries upon the death of the insurer.
While choosing life insurance, the advisor will help you to map it needs & goals. This will help you pick out the options that suit you the best.
Why Is It Important
Life insurance is of significant importance if you wish to protect your family or dependents from any economic hardship in your absence.
It's not an expense-many people think of it as one & choose to completely even consider its importance. It's a very essential tool that will help you build wealth and at the same time offer complete protection to you and your family.
Even if you have no immediate dependents relying on you financially, it doesn't mean that you don’t need life insurance. There are many costs that you need to factor in and which needs additional income to fulfill them. Life insurance helps you meet such expenses while safeguarding your current income
The unexpected passing of individual leaves a lot of void and the surviving members are left to cope with a lot of stress and trauma. And no matter what, expenses never ceases to exist; it just piles on- be it rent, childcare expenses, loans, etc. In such a scenario, loss of income would cause an immediate financial hardship and your loved ones are left struggling. Nobody wishes this upon their family, hence life insurance needs to be seriously considered.
What to Buy
There are many categories of insurance policies available in the market today. Depending upon your needs and requirement your Financial Advisor will help you pick out the right one. You need to give complete details on your current financial status, along with your short term and long term goals, so that your Advisor is well-equipped to make a prudent choice for you.
There are many categories like Retirement plans, Money Back Plans, Child Protection Plans, Endowment plans and much more.
Remember, life insurance is a great tool for both protection and helping you save in a disciplined manner which eventually leads to the creation of good corpus. With the help of your advisor, fix your goals align them with your financial objectives and lead a stress-free life with a financially secured future.
Types of Insurance
Term Life Insurance:
The most affordable form of life insurance, premiums of the plan under this category are cheap compared to other life insurance products.
The Sum Assured is paid out to the beneficiaries on the completion of the policy tenure.
Whole Life Policy:
As in the name, this type of policy covers an individual for his/her entire life. This type of insurance covers insurance and investment components.
The insurance part covers the nominee in the event of the death of the policyholder and the investment component helps the holder to borrow or withdraw against.
One main difference that Endowment Plans offer from term plans is the Maturity Benefit.
This type of plan pays out the sum assured along with profits under both scenarios - death & survival. The profits that are availed in such plans are the result of investment in equities & debt.
Money back Policy:
This type of policy gives out periodic payments over the policy term.
In case of the death of the policyholder, the beneficiaries get the full sum assured and if the holder survives the policy term, he/she gets the balance amount (sum assured).
Unit Linked Insurance Plans (ULIPs):
As the name suggests, this plan is linked to the markets.
This type of plan are a variant of traditional endowment plan and pay out a certain sum assured on death or maturity, whichever is earlier.