As per a recent survey conducted by the Indian Ministry of Finance this year, only 3 out of 100 Indians currently have some form of life insurance, and the number informs us of the financial vulnerability that encapsulates the majority of the population. However, the ongoing pandemic has been a catalyst in raising awareness, and more and more people in India are looking to buy life insurance policies.
Life Insurance is an essential means of providing financial security to your dependents in the unfortunate event of your untimely demise. There are a lot of options available when it comes to life insurance policies, and one is likely to feel confused and overwhelmed at the prospect of making such an important financial decision.
When the ask is to pick out the perfect life insurance plan, awareness is vital, and we are here to help you become slightly more aware so that you are in a better position to make an informed decision. Let’s begin.
Types of Life Insurance Plans
All life insurance products can be condensed into four main categories:
- Term Life Insurance: It is the most basic type of life insurance, wherein the policyholder is provided life coverage for a fixed term. If there is an untimely demise of the policyholder, the nominees are entitled to a sum assured. Term plans are extremely popular because they provide a large sum assured for low premiums, especially if you get one early in life. Note that Term Plans do not offer any maturity benefits, except for a return of premium in case you have opted for that Rider.
- Whole Life Insurance: As the name suggests, whole life insurance provides life cover to the policyholder for their entire life. If compared to a term plan, the premiums are slightly higher, but there are maturity benefits involved. There is also the ability to take a loan against a whole life insurance policy.
- Endowment Plans: Endowment plans are life insurance policies that have an element of savings involved. The policyholder is entitled to a sum assured on maturity as well, in addition to the sum assured that is paid out for life cover. Endowment plans are really useful in creating a risk-free corpus.
- ULIPs: Unit Linked Insurance Plans are life insurance and investment products that are highly customizable. They offer the policyholder the chance to invest in market-linked entities and reap the benefits of pure investments while enjoying the life cover of a traditional term plan at the same time. Check out Wealth Secure+, a comprehensive ULIP plan by Edelweiss Tokio Life Insurance to see how flexible and beneficial a ULIP can be.
How to Choose the Right Plan
Choosing among these plans can be a tough ask since all of them have a plethora of benefits that can be a worthy addition to your portfolio. But still, keeping the following pointers in mind can help narrow down your choices:
- Understand Your Needs: This is the first and foremost thing to consider. Your needs will determine the type of policy you should go for. If you are a young professional seeking to provide a financial safety net to your family, then a term plan is right for you. If you are a seasoned investor looking to reap the benefits of life insurance plus capitalize on your knack for investing money in the markets, then a ULIP plan is right for you.
- Check Claim Settlement Ratio: Claim settlement ratio is the number of claims per 100 claims that the company has approved. A higher percentage indicates a greater number of approved claims and hence shows the company’s track record. You need to look for a company that has a high CSR.
- Check Tenure: All life insurance policies have tenure, and it is essential that you choose this policy tenure keeping in mind your situation. How many dependents do you have? For how long do you plan on working? What are your goals?
- Policy Premiums: All four types of plans are affordable in their own way, but still, your personal finances can play a crucial role in deciding the kind of life insurance product that you can afford. You don’t want a policy that you cannot afford in the long run.
- Riders: A lot of insurance companies provide the option of adding Riders that can enhance your policy. These riders are designed to increase the utility of your insurance plan. Edelweiss Tokio Life Insurance is one such company that offers add-ons that are transcendental for your policy.
Good Practices While Buying Life Insurance
In addition to keeping the above-mentioned factors in mind, some general good practices while buying any insurance products are:
- Check the Fine Print: Always! Insurance Products are complex, even in their simplest form, and you will benefit significantly if you understand the policy, you are seeking and buying.
- Do Your Research: This stems from the earlier point. Today, most companies are committed to raising awareness about insurance and the products they offer online. Companies like Edelweiss Tokio Life Insurance have very detailed and feature-rich websites where you can calculate premiums, check out products and services, and find answers to most of your queries. By educating yourself thus, you can be in a better position to decide about the policy you choose.
- Utilize the Free Look Period: Free-look period is when you can completely understand your policy, and it can be 15 or 30 days, depending on whether you buy the policy offline or online.
This article can be a starting point for you to delve deeper into understanding life insurance. Fully committed to raising your awareness, you will find the Edelweiss Tokio Life Insurance website to be your next and hopefully final stop on your quest to get the right life insurance. Visit their website today to learn more.