Today, you might be working night and day to offer a financial roof to your family, fulfil their dreams, and ensure their best health. But have you wondered what will happen tomorrow when you are not there? Life is uncertain. As much as we hate to picture our family’s future without us, it is our moral and financial obligation to ensure that they live the life they want even when you are not there. This is where a life insurance plan comes in.
However, picking the right life insurance plans can be confusing, but it is a very important decision.
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So, the first step towards picking the right life insurance plan revolves around picking the best life insurance company.
The life insurance sector is noticeably big and complex. There is no shortage of insurance companies in the market offering you distinct life insurance policies. However, you can pick the one with a high claim settlement ratio. A claim settlement ratio is an indicator of the claim settlement ability of the insurance company. The higher the claim settlement ratio, the higher would be the probability of your claim getting settled. The indicator also tells you about the claim settlement process. A high claim settlement ratio would ensure a smooth, quick, and hassle-free claim settlement process.
Secondly, ensure that you are picking adequate coverage.
A life insurance plan assures the risk of your life and covers your family members financially. Life insurance companies offer plans as per your annual earnings. For any unfortunate event or death, the lump sum amount will be made to the nominee. This amount will help the nominee live a normal life without compromises. Having said that, the amount should be enough to meet your family’s financial requirements in your absence. If the coverage is not adequate alone, a sizeable savings fund should be coupled with it to meet the financial needs of your family’s future.
Thirdly, Decide the Type of Insurance Plans you Need
There are several types of life insurance available, catering to the diverse needs of different individuals. Picking the right type of insurance plan is essential. Here is a list of several types of life insurance plans available:
- Term Plan
- Whole life insurance
Term Plan: A term life insurance plan is a plan which provides coverage for a certain period or years. This life insurance plan is financially beneficial for the nominee in case of the sudden death of the policyholder. This type of policy provides more life cover at lower premium rates. In a term plan, premiums can be contributed to the term policy annually or regularly. In this case, you will get tax benefits, too; the premium paid for the term insurance policy is exempted from the income tax under section 80C. in the case of the policyholder’s unfortunate death, an assured sum is paid to the nominee. This amount paid to the nominee will be tax-free.
Permanent Life Insurance: Whole life insurance offers you financial protection for a lifetime. This insurance pays you a death benefit if you die tomorrow or live to be over 100. It comes with a cash value savings component. There are two primary types of permanent life insurance Whole life and Universal life.
Both types give you death benefits. However, whole life savings can grow at a guaranteed rate, universal life features diverse types of premium structures, and returns are based on market performance. Please note that permanent life insurance policies and premiums are much higher than term life insurance policies. But the premium remains the same in permanent life insurance, no matter how old you are.
ULIPs: Unit Linked Insurance Plans will cover the risk and offer returns according to the market. It offers dual benefit investments to fulfil your long-term goal and a life cover to protect your family. There are some key features of ULIPs; Life cover, the option to switch your funds, a top-up option to invest surplus money during the policy consistency, a partial withdrawal option, etc. The returns depend on the performance of your chosen funds.
How to Compare Plan Features and Extra Benefits
In some life insurance policies, you will get some extra benefits that make the plan more valuable. It would be the best approach to compare the premium payment features, whether it allows you to pay monthly, quarterly, half-quarterly, or annually. A smooth payment option is a very important factor in the insurance policy. Another important feature is the pay-out on the policyholder’s death or maturity.
Also, check for an investment component and the ability to assign nominees to the policy. Compare the quotes of all insurance companies and select the one best for you as per your budget.
Life insurance is an important financial tool. Now that you know the tricks to pick the best life insurance plans ensure that you pick the right policy to meet your future financial needs.