Need for Various Life Insurance

• 25 November 2015 | 1580 Views | By Mint2Save

You always plan to make such provisions for your future needs regarding education, marriage of your children, buying a luxury car, having vast piece of land and intermittent need of money for various  other purposes. For the same, we start saving money through different schemes of savings like recurring deposit, fixed deposit, investment in securities like shares, bonds, debentures and so on, for pre decided term/period so as to enable you to have sufficient fund to meet with the need and time. Agreed! You receive handsome amount, as planned, and you feel comfortable and cheered.

But, all this happens well before your eyes i.e.,  whilst you are living. Think or imagine about an ill and distasteful situation when you are not there in the world having left the rest of the family in lurch unfortunately. We all are aware about the bitter truth that to leave the world is inevitable but what scares dreadfully is when,where and how, unpredictable. It is inevitable but can not be anticipated exactly.

Hence, the need for life insurance is inevitable. Irrespective of your business, profession, age, income group, number of people in your house, you always need to have insurance. It is, however, very unfortunate that life insurance has been subject to market criticism and the products have indeed taken a toll on a few investors / insured.

In this article, we shall smoothen around a basic idea about necessity of insurance. Losing a loved one in early age is pain beyond words. The family gets wrecked, and devastated emotionally. The emotions are healed with time and life makes us to move on.

Coming to the practical dimension, the damage tends to hurt longer when the lost earner is the sole or major earner of the family. Insufficient liquidity not only creates issues in dealing with day to day expenses, but also harms long term goals like education, marriage, etc.

Not having an insurance shall deplete the family’s assets and hamper the standard of living drastically.

Therefore, with an  intention  to keep our family members safe, secure and comfortable by all means we endeavour/toil/labor/ work hardest possible to earn and save enough to make their present and do care to ensure their future too, with out any diffuculties what so ever that may be no matter bread winner is or becomes was.

This can be made easier if we purchase an insurance plan that can meet the need. Say, for example, you plan to have enough monetary assistance at the time of admission for career making studies i.e. higher education or  at the time of marriage or employment or business and so on, you may purchase an education policy or marriage policy or so on, which will serve the purpose even in your absence even if  you have  paid just one premium.

As the whole money equal to the sum assured, shall be paid  on the  date of maturity to the nominee or the legal successor, without asking for the payment of a single penny as premium, furthur. If you wish to have some money  with out affecting the risk cover (Insured amount) at different specific interval, money back policy is there.

Such a policy enables you to have an specific amount  at  fixed intervals, before the maturity, with out affecting the sum assured for an untimely mishap, and payment of full amount on maturity deducting the amount received at specific intervals.

Let us delve deeper to understand basic types of life insurance, irrespective of the fact of them being traditional or non traditional.

1. Term Plan: As the name suggests, this life insurance plan covers the insured for a certain amount upto a certain age. This age is usually considered to be the average retirement age. The premium for the same also fixed during the entire tenure of the plan. Terms plans are usually most affordable and premiums are lowest when availed at a lower age.
2. Child Plans: Designed specifically to support child education and other important events, these plans are a hybrid of insurance and investment. Apart from insurance coverage, these plans also provide annuities in form of bonuses etc., which can be utilised to fund education or other investments one seeks to make on development and growth of his ward.
3. Return of Premium Life Insurance: Return of premium plans can be summed as an add-on option over regular life insurance plans. When someone subscribes to a term plan, and lives through the entire tenure of the plan, he is not entitled to get back the insurance premium paid through the policy. When subscribed to a return of premium plan, you can get back the premium deposited with the insurance company, after the tenure of the policy is over.
4. Retirement Plans: These insurance plans are focused to serve on post retirement liquidity requirements, along with providing life cover. The insured earns regular bonus over the sum invested, which creates a healthy corpus by the end of the insurance plan.
5. Wealth Creation Plans: Sharing a concurrence with retirement plans, wealth creations plans aim for creation of wealth along with the provision of life insurance.
6. Critical Health Plans: Relatively newer to the insurance product range, this plan covers expenses related to critical diseases such as cardiac issues, cancer etc. The product has been introduced keeping in mind the increasing amount of expenses incurred during treatment of deadly diseases.

Child plans, retirement and wealth creation plans fall into a category of Unit Linked Insurance Plans. These plans provide an individual with a single tool to take care of his investments as well as insurance. Further, he can choose the investments as per his risk capacity and direct his investment to equity, debt or hybrid funds.

Almost all the insurance companies, other than term plan, declare bonus on  almost all types of running /in force policies which keeps on accruing and paid at the time of making final payment of death or maturity claim. Therefore, you can plan to choose purchase insurance policy as per planned future needs and affordibility from so different insurance plans.

After the elapse of certain period, the insurance policy can be pledged for obtaining loan from bank, recognised financial institutions, insurer who may even allow pre mature surrender of the policy for meeting the need of money.

As suggested and strongly recommended earlier, do  purchase an insurance plan at youngest possible age for the longest period of maturity, without comparing  the maturity value of money receivable with any other saving plans like Recurring Deposits., fixed deposits, investment in gold, silver, securities like shares, bonds,  systematic investment plans, debentures, savings certificates, etc.