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What Are The Different Types Of Life Insurance? Which One should You Buy

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Life insurance is a product that pays out a sum of money either on the death of the insured person or after a set period in return for a specified premium. Are you the one who is looking for life insurance but confused, which one to subscribe to? One thing that needs to be clear first, a life insurance policy is not a financial investment. There is no insurance investment that will provide you with a return on your money. One is thing is clear life insurance is not an investment buy Why should one subscribe to life insurance if it's not going to get anything out of it and which life is good to buy and why?

 

What are different types of Life Insurance?
 

What are different types of Life Insurance?

There are 3 different types of life insurance one can subscribe to:

1. Term Plan Life Insurance

Term life insurance is a form of life insurance that ensures the payment of a given death benefit if the insured person dies within a certain time period. When the term life insurance policy's term expires, the policyholder has the option of renewing it for another term, converting the policy to permanent coverage, or allowing the policy to lapse. It covers the pure risk of the insurance holder. This is the simplest type of life insurance policy.

2. A ULIP

ULIP stands for Unit Linked Insurance Plan, it is a multi-faceted life insurance policy with the full name of ULIP. A ULIP is a life insurance and investment plan in one package. As a policyholder, you must pay recurring premiums, a portion of which is used to provide life insurance coverage. The rest is combined with assets received from other policyholders and then invested in financial instruments in a manner similar to mutual funds. By purchasing a ULIP, you may protect yourself against financial disasters while also increasing the value of your money. ULIP, in simple words, offers Insurance plus investment benefits to the policyholder.

3. An endowment plan

Endowment insurance is a type of life insurance that combines both insurance and savings for the policyholder. It enables policyholders to save consistently over a certain length of time to receive a lump sum payment at policy maturity if they survive the policy term. According to the policy terms and circumstances, the policyholder receives his or her sum insured at a future period. However, if the policyholder dies unexpectedly, the insurance company will pay the sum promised plus any bonuses (if any) to the policyholder's nominee. It can also be used to protect yourself or your family after retirement or to satisfy a variety of financial demands.

Which Insurance Policy to Buy?

Which Insurance Policy to Buy?

Insurance is a pure product to hedge life risk. Investment should never be made using insurance products. A Health Insurance Policy would usually cover costs spent fairly and necessary in respect of each insured individual within the following headings, subject to an overall ceiling of sum covered. If you want to provide a sense of security for your loved ones, life insurance is something you should think about adding to your financial plan. A life insurance policy's proceeds might be used to cover funeral costs, pay off debts, or pay for day-to-day expenses. What you need and want a policy to do for you might determine whether life insurance is a good investment.

What should be a sufficient cover?

What should be a sufficient cover?

A better approach to think about choosing the correct life insurance is to consider the premium and coverage. The amount of life insurance coverage should be sufficient to financially sustain your family when you pass away, and the cost should be affordable. It is suggested that you have at least 10 times your yearly salary in life insurance. While it is an excellent reference to choose, you should consider what best fits your profile. Sufficient cover will depend on your living expense and your goals. Add up your expenses and your goals and any liability you may have. That generally will be the cover that you may need.

Rider

Rider

Critical Illness Rider: Companies provide a rider of accelerated payout of the sum insured in case of any critical illness. These are inferior to a pure-play critical illness cover. Rather than buying an embedded critical illness rider, one must buy a standalone critical illness cover.

Waiver of premium on critical illness: If you are diagnosed with a listed critical disease or become permanently incapacitated as a result of an accident, this rider will assist you to avoid having to pay your premium. This is an essential rider since it protects your insurance.

Things you should remember while taking insurance:

Things you should remember while taking insurance:

  1. Evaluate the need for a life insurance
  2. Be careful with the customizations
  3. Carefully evaluate the amount of cover, the age until which it should cover you.
  4. Disclose all the medical history to the best of your knowledge.

Story first published: Tuesday, January 4, 2022, 13:50 [IST]
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