Life Insurance Categories

Due to surge of covid cases, slowly Indians are changing their attitude towards Life Insurance. Eventhough no one can replace the emotional connectivity, Life Insurance can opt as financial aid to the dependents of the breadwinner.

some neglect insurance as it is not needed as it would not help him in his presence! But by opting insurance you are safeguarding your dearones. While Some assume insurance as an “Investment” but in reality it is not an investment, it is a protection layer to your lovedones.

Life Insurance is categorised into 4 categories. They are-

  • Endowment Plans
  • Ulips
  • Money-Back Policies(Cashback at periodic intervals)
  • Term Insurance.
  • Endowment Policies– These Policies offer lower risk cover with huge premiums. Generally this policies are for long term(15,20.25 Years)and can’t provide sufficient insurance coverage. The sum assured amount would be far below the inflation.

The only advantage of endowment policies are – It offers “Survival Benefits”. If the insured is alive at the end of the policy tenure, sum assured with cumulative bonus(in insurance interest will be treated as “Bonus”)will be paid.

  • Unit Linked Insurance Policies(ulips)– These policies are market linked where no assurance would be provided on risk coverage. Amount you invested in this policies are invested in market linked instruments. So there will be no assurance on the risk cover.

Generally ulips are carried with huge management costs. Your amount will be highly wasted for adminstrative charges where you will get less insurance benefits with this type of policies.

Financial experts suggests not to mix insurance and investments. Both should be managed individually. They suggest to avoid unit linked insurance policies(ulips)

  • Money-Back Policies- These polices are slightly different to endowment policies. In Endowment policies insured has to pay premiums monthly/Quarterly/Half-Yearly/Annually depending on his flexibiity.

But in Money Back Policies premium would be paid in “Lumpsum” where the insured would get money back in periodic intervals.

Perfect Example for this money back policy is – LIC’s Bima Bachat, a savings cum insurance plan with periodic payments.

  • Term Insurance– Term Insurance is getting more popular these days. This policies gives higher “Risk Coverage with Lesser Premium”. In this policies premium will be very low but subject to genuine disclosure of personal health issues to the insurance provider.

If you hide any health issues, your claim may be rejected. So it is better to disclose your economical status and health issues without any false representation.

The only drawback with Term Insurance is- “It offers risk-coverage only. Thatmeans no survival benefiits would be provided at the end of the tenure”.

But don’t neglect Term Insurance as it protect your dear and lovedones from financial struggles. Your Dependents would be awarded huge sum assured if any unfortunate event happen to you. It is your duty to provide financial assistance to your lovedones in the absence of your presence. So think about Term Insurance once again.

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