Menu

Life insurance policy

How do I Choose the best type of life insurance plan?

How do I Choose the best type of life insurance plan?

/ , /

Choosing the right term life insurance plan might be difficult, but it is also a critical decision for both you and your family because it allows you to safeguard your loved ones from life’s uncertainties. You may still be unaware of the many types of life insurance policies available in India and how they affect your financial well-being. For beginners, it might be overwhelming to choose among the various types of life insurance in India. In this article, we have narrowed down some pointers to help you narrow down the best life insurance options and also look at the different types of life insurance in more depth. Choosing among the various types of life insurance in India

Whole Life Insurance Plan:

Whole life insurance is a type of life insurance that provides coverage until the death of the insured. Though participating whole life insurance premiums are higher in comparison, policyholders get returns on a regular basis. Non-participating policies have lower premium rates, but the policyholder does not receive monthly dividends.

Unit-Linked Insurance Plan (ULIP):

A unit-linked insurance plan, or ULIP, is a form of life insurance plan that provides both investment and life insurance benefits. Due to its versatility, ULIPs are one of the most popular types of life insurance plans available. A part of the premium paid for ULIP is used to provide insurance coverage, while the rest of the amount is invested in a variety of investment options, including market-backed equity funds, debt funds, and other assets. ULIPs are particularly versatile investment options since investors may easily swap or divert their premiums between the many funds available. They are also marketed as having an advantage over other market products in terms of tax savings, as their proceeds are exempt from LTCG.

Term Life Insurance or Term Plans:

Term life insurance plan is the most common type of insurance due to the fact one could get extensive coverage at low premiums if compared with other types of life insurance . It is often regarded as the simplest and purest kind of life insurance. If the policyholder unfortunately passes away while the policy is in effect, the beneficiaries will get a death benefit. One of the reasons why people do not prefer term life insurance is the fact it does not provide maturity benefits. Certain forms of term plans, such as term plans with return of premiums (TROP), do, however, provide maturity benefits if the policyholder lives longer than the policy term.

Endowment Policy:

Endowment policies are a type of life insurance policy that serves as both an insurance and savings tool. These plans seek to give maturity benefits to the life insured in the form of a lump sum payout at the end of the policy term, even if no claim is made. It is one of the best types of life insurance plan for consumers who want the highest coverage while still saving a significant amount of money. Endowment policy helps the policyholder develop the habit of saving while also giving financial stability to their family. Endowment plans are roughly grouped into two types: profit-making and non-profit-making.

Money-Back Policy:

Again one of the best types of insurance plans, it pays policyholders a portion of the total sum assured at regular intervals in the form of Survival Benefits. When the policy reaches maturity, the policyholder receives the remaining Sum Assured. If the policyholder dies during the period, their dependents receive the entire Sum Assured, with no deductions.

Retirement Plan:

A retirement plan is a type of life insurance that focuses on ensuring your financial stability and security after retirement. As one knows, after retirement, you lose your regular income from work. If you continue to invest until retirement, the plan will help you cover your retirement needs. It requires you to invest a portion of your salary on a regular basis throughout your working life. When you retire, the money you have created throughout the years will be converted into a regular income stream. Retirement plans also include death benefits. Thus, if the policyholder unfortunately dies during the life of the insurance, their beneficiaries will get a sum assured.

Child Insurance:

A child insurance plan is a savings and investment plan that provides financial security for the child’s future in the event of the policyholder’s unfortunate demise. It is great for ensuring that the child’s future needs are met, even if the life insured is not physically there. Parents can invest in the best child insurance plans to satisfy the financial needs of their child’s schooling, marriage, or any other financial ambitions they may have.

Group Insurance Plan:

A group life insurance policy is a type of life insurance that covers a group of people under one policy. Individual life insurance policies cover one person for a set period of time, whereas group insurance covers at least ten people. Employers, banks, corporations can purchase group life insurance plans for their employees and clients. For example, Ram is the manager of a company; to safeguard his employees, he purchased a group insurance coverage. The policy will now be issued to Ram in the name of the firm. One of the distinguishing qualities of these life insurance policies is that you will be covered for the duration of your membership in the group. If you leave the group, your cover will no longer exist.

Savings and Investment Plans:

These plans direct your regular savings towards long-term investing objectives. Savings and Investment Plan is a combination of life insurance and savings that provides life coverage as well as assured maturity benefits. This allows you to arrange your finances and reach your life goals more smoothly.

When should you consider getting a term life insurance plan?

Consider getting term life insurance if you need life insurance for a specified amount of time. Term life insurance allows you to tailor the tenure of the coverage to the duration of your requirement. For example, if you have small children and want to ensure that they will have enough money to pay for their college education, you could purchase 20-year term life insurance. Alternatively, if you want the insurance to reimburse a debt that will be paid off in a specific time period, get a term policy for that duration. In other words, if you have a limited budget but want a significant amount of life insurance coverage, a term life insurance plan is perfect for you. This sort of insurance pays only if you pass away during the policy’s term, hence the death benefit rate per thousand is smaller than that of whole life insurance. If you are still alive at the end of the term, coverage will expire unless the policy is renewed or a new one purchased. Unlike permanent insurance, you will not normally grow equity through cash savings.

Keep in mind that premiums are lowest when you are younger and increase with renewal as you age. Some term insurance plans can be renewed when the policy expires, however the rate will usually increase.

Why do Young Adults need to have both a health and life insurance Policy?

Why do Young Adults need to have both a health and life insurance Policy?

/ /

Some of the Young adults and Gen Z are emerging as a financially responsible generation. This financially savvy generation sees health insurance as a shield against unexpected medical bills and views it as a key investment. However, if you still think “I’m young, healthy, and fit. “Why do I need health insurance?” then this article is certainly for you.

While it may seem counterintuitive, the best time to purchase a life insurance policy and health insurance is while you are young and healthy. When you acquire these two policies at a young age, not only you will get coverage at a low price but are also less likely to have any pre-existing diseases. Here, we will be discussing the top reasons to purchase health insurance at a young age:

1. It is an investment for your future

We all know the expenses of medical treatment continue to climb. The epidemic reminded us that hospitalization costs are not always affordable and making a small investment in your health now can pay off significantly when you need it the most. A decent health insurance plans not only provides crucial financial coverage during an illness, but it also gives you peace of mind knowing that you do not have to manage medical bills on your own. In other words, comprehensive health insurance coverage is a vital part of a sound financial strategy. 

2. Your money has sufficient time to grow

When you get a life insurance policy at a young age, your money has more time to grow. As a result, investing in your twenties increases the death or maturity benefits that you will receive at the end of the policy’s term. For example, if you get a life insurance policy at age 25 and continue to pay premiums until age 60, your money will have 35 years to accrue into a retirement fund. On the other hand, if you acquire the same life insurance policy at 40, you only have 20 years to grow your funds. In other words, investing early can increase the cash value of your investment in the long run. 

3. No need for medical exams

If you are young and considering purchasing health insurance plans and a life insurance policy for yourself or your loved ones, it is unlikely that you will be required to undergo medical exams in order to obtain the necessary coverage. Even if you had to go through one, it will be less likely you will have any pre-existing illness.

Most insurance firms require policyholders to undergo comprehensive medical examinations if they are over a particular age.

4. Tax Benefit

A further incentive to invest in life insurance and health insurance plans is the tax advantage. Section 80D of the Income Tax Act allows you to claim deductions for the premiums one pays for their health insurance policy. While such tax benefits are available to elderly citizens, investing in health insurance plans early allows you to take advantage of them for a longer period of time. Section 80D allows you to claim a tax deduction of up to Rs.25,000 for purchasing health insurance for yourself, your spouse, and your dependent children. You can get an extra Rs.25,000 if you buy health insurance for your parents. If your parents are older than 60, the ceiling rises to Rs.50,000. That implies you might potentially save Rs.75,000 on your taxable income while giving those you care about the safety they require.

The same applies to life insurance policy. Section 80C of the Income Tax Act states that the premium paid for life insurance during a financial year is deducted from the total taxable income. This benefit can be claimed for premium payments up to Rs. 1.5 lakhs every fiscal year. So, if your annual premium payments total Rs. 1 lakh, you can deduct the entire amount from your income. This, in turn, reduces your tax liability. If you acquire life insurance when you’re younger, you can benefit from a lower tax burden at a time when you most need it.

5. Lower premiums

It goes without saying, that the younger you are, the lower your premiums are going to be. Insurance companies give health insurance to people as young as 91 days old. Purchasing insurance early also means potentially more coverage, no pre-existing conditions, lifelong renewability, and the ability to simply navigate the waiting period.

6. Lower rejection rate

When you purchase a health insurance plans coverage at a young age, you are less likely to have any major illness or disease than individuals over the age of sixty. As a result, young individuals are less likely to file claims in the eyes of an insurance company. Also, it reduces the possibilities of your claim being rejected, as in the case of old people.

As young adults begin their road towards independence and self-reliance, getting health insurance and life insurance policy may not always be at the top of their considerations. Regardless of your age, purchasing an insurance policy is a wise decision. However, recognizing the significance of these two insurance policies during these formative years, on the other hand, is an important step towards ensuring the well-being and financial security of your own and your family members. Also, purchasing when you are young and healthy can be more beneficial in the long run.