Various Types Of Insurance Plans - How To Choose The Right Plan

 

There are a plethora of insurance plans in the market, and choosing the right one needs careful study. Any insurance plan which you select must fulfil your goals. That is to say, your financial goals. If you wish to grow your money, a unit-linked insurance plan, or ULIP, may be suitable. However, if the idea is to just get a life cover and accept the amount the insurance company wants to payout at maturity, then a simple term insurance plan is enough. 

Term life insurance plans are generally a life cover in their basic form. This offers a life cover of a certain sum in exchange for a fixed premium payable annually. However, this type of plan has certain advantages. The premium for these is lower than for other plans. The maturity amount includes the premium paid as well as interest and bonus. 

Therefore, the insured knows that he will get a certain sum at a specific time in the future. Such plans are useful for planning financial goals, such as expenses for higher education for siblings or marriages. Then again, loans are available against such policies, so that sudden requirements of funds can be met by taking a loan against the policy. 

Term life insurance policies may also be modified to include a clause that ensures that double the sum assured is payable in the case of accidental death. This means a slightly higher premium but is certainly a useful clause to have.

However, if the idea is to increase the amount of premium that the insured is paying, then the best idea would be to invest in a unit-linked insurance plan. This is known as ULIP in short. The benefits of such a policy are dual. The first benefit is that there is a life cover, which is usually 10 times the premium. A higher sum assured can be negotiated with the insurance company. Therefore the basic function of life insurance is present in this policy. 

The other advantage of such a policy is that a portion of the premium can be deployed as an investment in market instruments. This means that the money being paid to the insurance company as a premium will grow. The maturity amount will obviously be higher. 

The type of investment and the portion to be invested ( from the premium amount) is for the insured to decide. He may apportion a larger amount or a smaller amount for this purpose, depending on what financial goals he has set himself to achieve. There are three ways in which this investment may be planned. The first is the steady income low, risk and low gain type of investment. Here while the gains are low, the risks are low. Then there is the high risk and high gain type of investment. If there is the capacity to take risks, then this type of investment can bring in a high rate of return. This policy offers income tax relief under Sec. 80C of the I.T. Act. Therefore savings, life cover and investment gains are all present in this policy. Young applicants should consider such a policy. However, it is necessary to plan a unit-linked insurance plan carefully. How much to invest and in what sort of market instruments. It is best to check out the plans being offered by various companies online. Also, check out sites which offer under one umbrella policies of different companies. Choose the one that suits your needs and offers the best returns.