Which Life Insurance Policy Type Should You Choose?

Security of your future and that of your loved ones is one of the most important aspects of your life that your finances should be funnelled towards. If you are responsible for someone else, such as your children, you may want to make provisions to ensure that their financial future is secure, so they can ensure their security and live their lives with dignity.

A life insurance policy can help you achieve this. To ensure that it works out right, choosing the right type of policy is the first step. Before we dive into how to choose the right life plan, let’s take a look at what life insurance is, and the types of policies available today.

Life insurance is a way to create a financial safety net for your loved ones to fall back on in case of any emergency situation. You enter a contract with the policy provider where you agree to pay all premiums on time, and in return, the insurer offers you a sum assured that can be claimed as a benefit if any of the situations covered by the policy were to occur. Once you understand what life insurance is, it is time to understand the nuances of the policies available.

Types of Life Insurance

1. Term life insurance

If you are looking for a simple and affordable life insurance plan that can work for the short duration as well as the long term, your search may end with term life insurance. Level term plans offer only death benefits. For other benefits, you may customise your policy with riders, or choose a return of premium term life insurance policy that offers nominal maturity benefits.

2.  Whole life insurance

If you want a long-duration cover with simple maturity benefits as well as death benefits, you may want to consider a whole life insurance policy. It offers coverage up to 99 years of age. If the life assured survives this duration, they may be paid a maturity benefit. If not, their nominee can claim a death benefit. Riders and other benefits may be available with these plans.

3.  Endowment policy

If maturity benefits take precedence for you, or if you seek more from a life insurance policy than a death benefit, it may help you to take a look at endowment plans. These plans can be viewed as savings plans that offer the best of term life covers and whole life insurance. They can be taken for a duration of as low as 10 years, and they pay maturity benefits at the end of the duration.

4.  Unit-linked insurance plans

If you have a risk appetite and want to dabble in funds while also ensuring you have a life cover, ULIPs may be the policy for you. It is a life insurance policy that also offers the benefit of market-linked investments. This may eliminate the need for you to find other investment avenues. Since the investment side of these plans is managed by fund managers, you may not need to be hands-on about managing your wealth creation through these plans.

5.  Child plan

If the security of your little one’s future is on your mind, you may be looking for a child insurance plan to alleviate your worries. These plans can be bought by a parent to ensure that their child’s needs are taken care of, whether they are present with them or not. These plans offer pay-outs at the milestones of a child’s life, such as their higher education. Thus, they also allow parents to plan for the child’s future and create a corpus by consistently saving through these plans.

How to choose the right policy type?

When choosing a life insurance plan, one of the first things to keep in mind is your goals, for the long-term as well as the short-term. You should get a policy that aligns with your goals and puts you on the path to achieving them.

Furthermore, you have to ensure that a plan that secures your future does not burn a hole in your pocket today. You can start by using a life insurance premium calculator to get premium estimates and see whether the sum assured you want for the plan you like fits your budget. 

If you are looking for something on the affordable side, term life insurance plans tend to be known for being low cost. If you are comfortable with relatively higher premiums but want returns that will push you closer to your long-term goals, you may want to consider ULIPs or endowment plans.

In addition to this, you may also want to check the claim settlement ratio of the insurance provider. It is a number that tells you how many claims the company has successfully settled in the past year. Moreover, also check the inclusions and exclusions of the policy as well as the riders being offered with it.

There are a number of life insurance plans available in the market today and it is easy to get lost in the wide range of details. It is necessary to ensure that the plan you buy is right for you and the future of your family.