Life insurance has remained hidden in the shadows of financial planning tools for many years now. However, with more individuals becoming financially aware and identifying the need to build a financial safety net for their future the demand for life insurance policies has surged among young individuals. These insurance plans have transformative power over finances as they act as the safety net for one’s loved ones and help them remain independent during financial crises or emergencies. As financial awareness around life insurance is rising the demand for different types of plans that cater to unique needs is also rising. As a result, a spectrum of insurance options are coming into existence and gaining prominence in the market. For instance, from protection against unexpected financial loss to building a robust corpus for education, early retirement, and goals, today there’s a life insurance plan that meets these requirements and more. However, picking the right kind of plan is still a necessity to fulfill goals, and that can be ensured only if individuals know about their requirements and the products available to them.
Let’s explore the different life insurance policies available today to understand their scope, offerings, and applications for different individuals.
Types of Life Insurance and their use case
These are among the most popular life insurance plans today –
-
Term Insurance
A term insurance plan is essentially a financial umbrella that helps individuals tide over uncertainties. Today, a term plan is one of the most sought-after types of life insurance policies. It is designed to help individuals extend loved ones a reliable safety net in the event of the insured’s untimely demise. Typically, a term insurance plan offers a fixed premium that depends on the applicant’s age, health condition, and the desired coverage amount. Usually, the premium is a small regular payment that goes towards securing the financial future of the family. In the event of unforeseen situations covered by the plan, the beneficiary of the plan will receive the sum assured, the one-time payout from the insurer. This helps individuals to account for their debts, existing loans, living expenses, and future obligations such as meeting the cost of a child’s education.
- Critical Illness Cover
Critical illness is essentially an insurance that helps create a medical backup during an emergency. Whenever the insured is diagnosed with an illness that is covered under the policy, such as heart disorder, stroke, hypertension, or cancer, the insurer will extend the promised sum to help cover the cost of treatment. The lump sum helps individuals meet the costs, ranging from living expenses, medical bills, etc. The financial assistance will allow the insured to seek treatment without increasing the financial burden of their dependents. However, before buying the insurance plan it is advised to be honest about one’s financial conditions. Though existing illnesses may increase the premium value, at least their claim will not get rejected on account of misinformation. In addition, individuals should look for insurance providers with a high claim settlement ratio to be sure that their claim request is likely to get approved. However, individuals must note that critical illness coverage is not necessarily a replacement for health insurance. It just extends the coverage of a basic plan and helps meet the cost of treatment during a diagnosis of critical illness. These plans also accompany tax benefits on the basis of their tax slab.
-
Investment Plans
Unit-Linked Insurance Plan: This particular insurance plan helps combine the best protection plan and investment aspects in one plan. The plan allows individuals to choose where they want to invest their money depending on their goals and risk tolerance level, with investment options like debt, equity, or hybrid funds. Since these investment options are linked to the market, individuals are suggested to identify their risk appetite before choosing options and to regularly reallocate resources to cushion the ULIP portfolio against market volatility. Individuals can withdraw funds or switch them as and when needed to adapt to their evolving goals and maximize their returns.
Endowment plans: These plans are known to offer guaranteed returns and not market worries. Endowment plans are deemed perfect for individuals who want insurance perks and predictable growth at the same time. A part of one’s premiums goes towards their future payouts and the rest offers life insurance protection cover. In case of the sudden death of the insured, the beneficiary of the plan will get the death benefit. On the other hand, if the insured survives the policy term they will get a bonus payout. This assured stability makes endowment plans suitable for salaried individuals who wish to save for the future and protect the financial future of both their own and their dependents.
-
Child Insurance Plans
These insurance plans help individuals to build a robust corpus for their children’s future needs. Such a plan allows parents to save up for their kid’s future milestones, ensuring all their needs are taken care of in the future even when they are not around. These plans offer guaranteed returns and help fulfill major goals in kids’ interests smoothly. Individuals typically pre-plan their financial needs for various milestones, ensuring the child’s education and key requirements are covered and taken care of in advance. The built-in insurance component ensures that the kid’s needs are met and their other corpus is not withdrawn to support their goals.
-
Retirement Plans
These insurance plans are like long-term savings options that allow individuals to grow a substantial retirement corpus by offering them guaranteed returns over the term. However, the main goal of these plans is to protect the insured’s capital so that they can enjoy a comfortable life and financially independent lifestyle post-retirement. Such plans offer the flexibility to choose how they want to receive their insurance payout – either as a one-time lump sum or as a regular stream of steady income.
Safeguarding one’s financial future and protecting one’s needs is the essence of these plans. These insurance plans are designed to help individuals meet specific needs and requirements. However, individuals should check the accompanying features and clauses before they buy the insurance plan. This will help them pick an insurance plan based on their requirements.