Life insurance, as you know, is a written agreement between the insurer and the insured. The insured pays a fixed amount as premium. The insurer, in return, safeguards his/her financial future. It gives the insured a fixed amount upon the death of the policy-holder. The same happens when the fixed term ends, and the policy matures. The market offers a wide variety when it comes to life insurance policies. Given below is an overview of the most common among them.
Term Life Insurance Plan
Term life insurance is a plan that offers death benefit to the insured. If the person dies within a stipulated time period, the family of the insured receives a lump sum amount. If the person outlives the specified time limit, the insurance becomes invalid. And one cannot file a death claim. This is the most affordable form of life insurance available in the market today. To be simple, term insurance is a form of income replacement. And it is valid only for the term agreed upon.
Term life insurance can further be divided into three; level plans, decreasing policies and increasing plans. And the best term life insurance policy depends on your preferences and requirements.
This policy combines investment and protection. Half of your premium is invested in different funds your insurer chooses. The other half is used to protect you during financial emergencies. The plan is highly recommended as a long-term investment. Your insurer may give you the option to invest in the type of fund based on your risk appetite.
Endowment insurance plan is a form of term insurance protection with one huge difference. The former expires if the insured does not die within the stipulated time period. An endowment plan, on the other hand, ensures a fixed sum in both situations; if the person dies or when the policy matures. The premium, however, is high in endowment plans. The benefit amount you received in the situations mentioned above also includes the profit. This happens because the insurer invests your premium in asset markets.
Money Back Plan
The policy is a form of endowment plan. But here, the insurer provides numerous survival benefits. These are awarded in phases during the period of the policy.
Whole Life Insurance Coverage
The plan works slightly different from its other variants. All the other plans end when the agreed upon term expires. A whole life insurance plan extends till the end of your life. It also offers great many survival benefits. The insurance offers you the option to withdraw part of your insured amount. You may even borrow from the plan.
Here, your premium accumulates as your own asset with the company. And you will start receiving the benefit from the time you indicate. You either get a lump sum amount or benefit depending on your requirements.
There is nothing as the best life insurance policy. Know your requirement, allocate a budget and choose a plan accordingly. Insurance is greatly affordable today. And you have no choice, but to protect yourself with adequate life insurance coverage.
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