The importance of a simple life insurance plan like a term policy, or even a complex one like ULIP, is often overlooked simply because of unawareness. There are so many different insurance options, investment plans, and schemes on the market today. But no matter which stage of life you are in or how expansive your financial portfolio is, it is incomplete without a life insurance plan.
What is Life Insurance? Life insurance is a financial product which provides coverage for your life in exchange for annual premiums (paid in a lump sum or periodically). The coverage is provided in form of a sum assured, also called a death benefit. In the event of the untimely passing away of the policyholder, the beneficiaries/ nominees are entitled this sum assured upon filing a successful claim.
Based on this primary feature, there are certain variations of a life insurance policy, the chief among them being:
- Term Plan – Term Insurance is the market’s most popular life insurance policy. It provides you life cover for a set period (the term) for a large sum assured. Typically term plans do not have maturity benefit. However, there are some term plans which offer Return of Premium feature.
- Whole Life Insurance – It is similar to a term plan but provides life insurance for a more extended period of time, typically your entire life.
- Endowment Plan – These are an amalgamation of insurance and savings product. These provide life cover during the policy period and can have the option of getting returns on your investments. They are great savings instruments.
- ULIP (Unit Linked Insurance Plan) – These hybrid insurance products provide the dual benefits of a term insurance plan for financial security and an investment plan for wealth creation.
Although every investment gives the maximum return if made early, we can chart the life of a professional and see how different plans have relevance at various stages of life.
When you have just begun your professional journey, it is advised that you go for a term plan. Term Life Insurance, being the basic type of life insurance, has low premiums as compared to other policies. Sum assured provided is also higher. Getting it early in your life can be beneficial as you can lock in some of the lowest premiums possible and start a good financial portfolio. Even though the responsibilities are less when you are young, being responsible and getting financial security for your family right in the beginning can help in the long run.
The tax benefit can ensure that you save more and invest more!
A few years pass by, and you might decide to settle down and get married. This is the stage in your life where you can add your spouse to your life insurance plan. With married life, you might find yourself buying a house or a car, and the chances are that you will take out loans for the same. These loans are future liabilities that can fall on your family and spouse in case you are not around. Having a life insurance policy can mitigate these loans’ impact and ensure the family is protected against liabilities.
This is also the appropriate time to start planning for your retirement. ULIP plans can come in handy for that, as they feature wealth accumulation and partial payouts, which can be used as pensions. You can consider the Wealth Secure+ plan offered by Edelweiss Tokio Life Insurance. It is a comprehensive ULIP that grows with you.
In a few years, your family will expand, and your responsibilities grow. The expenses also rise, and it becomes crucial to save for the future, not just yours but now your children’s as well. This is an excellent time to either increase your life cover, adjust your current salary, or take out additional policies, especially for your children. In bad times, you can also take a loan against your existing policies (whole life insurance, endowment plans, and ULIPs).
ULIPs can be specifically tailored to provide for your child’s future needs, whatever they may be. In addition, some life insurance policies with a maturity benefit can also be used to fund your children’s endeavors.
In the years following the birth of your kids, till you finally hang up your work boots, you can continue to save and invest; for now, multiple futures need to be cared for. And finally, you reach-
If you are planning for retirement, biggest concern is to have a regular source of income. A guaranteed income plan assures you a guaranteed stream of income during the leisure days of your life.
So, life insurance can prove beneficial at all stages of life. You will never go wrong with a life insurance policy. Edelweiss Tokio Life Insurance has a complete range of life insurance products for every stage of your life, from Term Plans to ULIPs. You can learn more about them on their website.