Types of Insurance & Which type of insurance should you buy?

 

With so many types of insurance products available it could become difficult to decide what type of product is best suited for you. Here’s what you need to know to help you decide what to buy, based on your financial needs or life stage…

Technically, insurance should be sold based on the needs of the person who is to be insured. But sadly, we often come across overzealous insurance agents who oversell expensive insurance products, in some cases to earn fat commissions. Now, become a proactive buyer by educating yourself about different types of insurance products designed for various life stages.

Term Insurance Plans:

The sum assured of such plans is paid to the beneficiaries (family, parents or children) only if the policyholder dies within the policy term. This type of product is designed for 100 per cent risk coverage. Hence, the premiums for this type of life insurance policies are the lowest amongst the entire insurance category.

Suitability: Single or Married with or without Kids

Whole Life Plans:

The policyholder enjoys life coverage throughout his or her entire life. On the death of the insured, the validity of this life insurance policy expires and the corpus is paid to the family.

Suitability: Single or Married with or without Kids.

Endowment Plan:

In this type of plan, if the insured dies during the term of the plan, the beneficiaries receive the sum assured. If, however, the insured survives the term of the plan, he or she receives a lump sum of money. Such plans help you to accumulate funds over a longer period of time enabling you to meet future obligations such as buying a flat or an annuity policy.

Suitability: Ideal for individuals who wish to save for the future and at the same time purchase insurance cover.

Money-Back Plans:

With such plans, the insured regularly receives a percentage of the sum assured at regular intervals throughout the policy term. The periodic payouts of Money Back Plans are useful for meeting financial obligations from time to time such as children’s higher education or marriage, foreign tours, etc.

Suitability: Ideal for those looking for a 2-in-1 product – insurance cover plus savings.

ULIP:

This category of insurance combines the advantages of risk coverage with the benefits of mutual funds. A certain percentage of the premium is invested in listed equities, debt funds and/or bonds, depending on what options you choose, and the balance meets insurance and fund management expenses.

Suitability: ULIPs are a good option for investors who would like to get involved in managing their investment cum insurance funds.