Over the years, life insurance companies have come up with many products and plans that aptly suits buyers’ requirements. As a result of this, there are several options to choose from. From protection for the family or key employee, securing children’s future to planning for retirement, everyone has their own needs and accordingly several options when to comes to purchasing a life insurance. To help with this, let’s take a look at different life insurance plans:
Life Insurance Plans and Its Uses
By analyzing your financial requirements, you can easily find a suitable plan. Usually, life insurance plans can be categorized into two types:
- Based on the investments
- Based on risks
Based on Investments:
The plans that fall under this category are:
Traditional Whole Life Policy: This type of life insurance policy lasts until the lifetime of the insured. Upon death, the assured amount goes to the beneficiaries of the insured person. Unlike term insurance, there is no expiry of this plan. There is a cash value which can be claimed (borrowed against or withdrawn) by the policyholder. There are tax benefits as well, the premiums paid are eligible for tax deductions and death or maturity claims are completely tax free. It is ideal for estate planning or leaving a legacy for your loved ones, planning a future for your grandchildren, etc.
ULIPS: It is the acronym for Unit Linked Insurance Plans. The insured gets full control for investing in this plan. Over the long-term, ULIPs prove to be a trustworthy solution for tax planning and savings. The insured/beneficiary gets the benefit of tax-free withdrawals along with the maturity benefits of the insurance policy or the death of the policyholder. The benefits of ULIPs include high returns and low chances of risks.
Based on risks:
The plans under this category are:
- Term Insurance Plans: When it comes to availing a good life insurance plan at an affordable price, term insurance plan is the best. They offer high cover for a defined term thus, providing protection and financial stability for the family. This is the best option for people with dependents and for people who are the sole bread earners of their family.
- Savings Insurance Plans: They are also called money back and endowment plans and offer dual benefits of saving for a long time and lifetime coverage. The beneficiary gets a lump-sum amount at the time of maturity of the policy. They also get death benefits, discounts on annual premium payments, and tax benefits.
- Annuities: Annuities are normally for senior citizens, where they pay lump-sum or instalments to the insurance company and gets “returns” in the near future. The payments by the insurer last for a specific period of time. These plans are ideal for people who want to cover for their income loss during the retirement phase of life.
- Pension Plans: They are also known as retirement plans or deferred annuity plans. These plans help during retirement when insured has no source of steady income. Depletion of income can cause financial issues and a pension insurance plan takes care of the same. This is ideal for anyone who wants to build a funds corpus for retirement.
- Children Plans: To tackle the expenses of children’s education or marriage, you need a sturdy child insurance plan. By starting early and purchasing a child plan, you can take care of your child’s needs at any stage in life.
Comparing Life Insurance Plans
Every life insurance plan comes with a silver lining, has its own importance and caters to different requirements.
Protection plans like traditional whole life policy and term insurance help you during difficult times, like sudden illness or demise. Hence, their main purpose is protection. They take care of the nominee’s liabilities and burdens such as debts and loans.
Growth plans like a child plan or a savings plan can help with the future of loved ones. Individuals invest with a specific purpose in their mind, like dealing with student loans, college education, marriage of children, and other similar expenses.
Similarly, retirement plans focus on the long-term planning of people with respect to their future and old age. Such plans act as a substitute for pension and can be withdrawn when required.
To know more about all these plans and more, log-on to Coverfox.com.