An insurance policy is a necessity because there’s no one who would want to think of a future where their loved ones are not given the financial support they require. Just like you plan out your groceries, meals, etc., from before so that you can provide the meals to the members of your family on time, you require to plan out your finances in advance too. There are a few unforeseen incidents that require prior planning even though they may be uncertain. One such plan may be of financial arrangement for your dear ones for a comfortable future where you might not be there anymore. While the emotional connection is tough to be compensated for, but the financial woes can be well taken care of if you opt for adequate life insurance coverage.
This is one of the initial steps towards a prudent financial life and hence staying aware of the nature as well as the scope of life insurance is important. The onset of the COVID pandemic led to a steady penetration of insurance in India, which pushed from 2.82 per cent in 2019 to nearly 3.2 per cent in a year. While these figures might appear less, they are equivalent to the global average.
The enhancement also can be related to the fact that an increasing number of individuals are realising the essence and prioritizing their finances above other aspects. Creating a secure future for your loved ones is a key goal for most millennials.
What’s a life insurance plan?
A life insurance plan assures lumpsum payout of death benefits to your i.e., the insured family in the case of your demise during the insurance plan tenure. To offer financial security, you would require paying the premium to the life insurance company for a particular time frame.
What’s the nature of a life insurance plan?
There are distinct kinds of life insurance plan that you can select from. While a few offers just the life cover, others can provide a savings component too, which gets disbursed as a maturity benefit. So, to understand well the exact life insurance nature, you require understanding the distinct kinds as every type differs from one another.
Term insurance plan –
A term insurance plan is bought for a specific fixed tenure that may be up to eighty years. Under the pure protection plan, you as a policyholder can buy just the life cover. In the case of the insured’s death, the death benefit is received. In the case you survive through the policy term, zero benefits are provided.
TROP (term return of premium plan) –
TROP, as suggested by the name, is a savings cum life insurance coverage plan. In the case you are a policyholder who expires during the policy tenure, your nominee will receive the death benefit. However, in the case, you survive this tenure, then you get all premiums you have paid so far.
Money back plans –
Moneyback insurance ensures you get a constant income alongside assured life cover. You can select to get this income at periodic intervals or specific life stages by paying a premium regularly. Besides this, you as a policyholder might even get the maturity benefit if you survive the term of the policy. The nominee gets the death benefit in the case the insured expires during the tenure.
Child insurance policy –
A child insurance policy comes with a savings unit that allows you to plan out your child’s future financial requirements. The policyholder gets the life cover, and a portion of the premium is saved for the ward’s financial goals such as higher education and wedding.
Unit-linked insurance plans (ULIPs) –
In case you are looking for a cover that even allows you to invest, ULIPs comes across as an ideal product. One part of the premium endows you with life cover while the other portion remains invested in the market-associated investment, which may be in the debt or equity market or a combination of both depending on the investment choice. However, ULIPs come with a lock-in of five years.
Endowment policy –
An endowment policy endows both savings opportunities and life cover. One portion of the insurance premium is saved to attain lumpsum maturity benefit while another portion is invested for life cover. The insured receives the benefit on maturity in the case he/she survives through the tenure. If not, then the nominee or family gets the death benefit.
Whole life policy –
Whole life insurance is a plan that covers the insured until the time they reach 99 or 100 years. In the case the insured dies during the investment tenure, the family behind might get the death benefits. This is owing to the presence of a long-term whole policy also called whole life cover.
Retirement plans –
A retirement plan, as suggested by the name, is an ideal plan for their post-retirement age. This plan provides a life insurance cover and even pays a lump sum benefit on death to the nominee if the insured passes away. Besides this, one portion of the retirement plan’s premium is even used for offering a regular income source as an annuity that might be deferred or immediate.
Group life insurance policy –
A group life insurance policy is one of the most popular covers in the employment sector covering all members of the group. All group members collectively make payment of the premium and get life cover under a single plan.
Scope of life insurance policy –
The demise of any family member can be a devastating episode and if the deceased was the breadwinner of the family, then the financial burden upon the family may be massive. A life plan, thus, is a necessity for each household.
Secure a family’s goal –
Being a primary earner in the family makes you responsible for plenty of duties and liabilities. If anything, unfortunate takes place, then the death benefit provided to your family can assist you to sustain a convenient and comfortable life. Thus, considering adequate insurance coverage and selecting a suitable sum assured is important for the security of the family.