You may have a dream of owning a house, a car and travelling to exotic places during your periodic vacations from the routine. You can also have a goal of supporting your child to take up a career of his/her choice. In addition to all these goals, you may also be thinking of your life after retirement.
These life goals are closely related to your financial life, and the majority of your investments will be directed towards them. These financial goals are so common that life insurance companies have designed saving and investment plans to help you fulfil your specific goals.
Various life insurance plans aim to fulfil one or the other important financial need you encounter in your life. Here are the types of life insurance plans you can invest in to meet different goals in life:
|Financial Protection||Wealth Building||Child’s Goals||Retirement|
|1. Term Insurance Plan||1. Participating Life Insurance Plans||1. Child Endowment & Moneyback Plans||1. Guaranteed Income Plans|
|2. Critical Illness Health Insurance||2. Unit Linked Life Insurance Plan (ULIP)||2. Child ULIPs||2. Deferred Annuity Plans|
Term Insurance Plans
Term insurance plans are meant to offer long-term financial safety for your dependents in the case of your early demise. With term insurance, you can buy large life cover at nominal premiums. Also, add features like regular income death benefit payment to make the financial life easier for your family after your demise.
If you are the only income earner in the family, a lot would be at stake apart from emotional attachments in case fate has other plans for you. A term insurance plan can at least reduce the trauma caused by financial difficulties in your absence.
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Critical Illness Plans
Critical illnesses are life-threatening diseases such as cancer, renal failure, heart ailments, etc. Treatment for such disease could be long and unpredictable, not to mention financially taxing. The critical illness insurance policy pays out a fixed lumpsum amount, on the diagnosis of one of the listed critical illnesses, to cover incidental expenses or replace lost income during absence from work.
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Participating Endowment & Money Back Plans
Endowment and money-back life insurance plans are ideal for risk-averse investors. You can use these plans to grow your wealth safely or draw a regular income to meet the expenses at different milestones in life. These savings plans are participating and non-participating. When you invest in a participating plan you invest to receive additional bonuses on your investment at maturity.
These plans will add the due bonuses with the death claim as well.
Unit Linked Insurance Plans (ULIPs)
ULIPs allow you to invest in a mix of debt and equity funds based on your risk appetite. You benefit from the higher returns from equity while having the safety net and predictable returns from debt. Equity investments are good for wealth generation. Thus, you may want to start investing in this plan early on.
ULIPs like Invest 4G from Canara HSBC Life Insurance also permits partial, systematic, and milestone-based withdrawals. Thus, ULIPs are flexible and you can use them for many of your life goals, including children’s education and your pension goal.
Pension plans help you to convert your wealth into a reliable income stream post-retirement. These annuity plans can offer lifetime income out of your invested corpus and pass on the remaining sum to your progeny after your demise. You can hold the plan jointly with your spouse so she would continue to receive annuity after you until her demise. The purchased/invested amount would then be handed over to the nominee.
How to Compare Life Insurance Quotes?
It is only logical to want to compare different available life insurance quotes before investing. For each category of plans, you will have a lot of options in the market. However, comparing life insurance quotes is not as straightforward as comparing prices. You should look at the different features and benefits available in the plan.
Let us look at the few parameters that you must consider and compare while evaluating options:
|Financial Protection||Wealth Building||Child’s Goals||Retirement|
|1. Tenure of the plan||1. Investment/premium payment tenure||1. Investment/premium payment tenure||1. Investment/premium payment tenure|
|2. Option to increase life cover in future||2. Policy term||2. Policy term||2. Policy term|
|3. Regular income pay out option for death benefit||3. Flexibility in premium payment modes||3. Portfolio management options||3. Option to hold jointly with the spouse|
|4. Add-on covers/riders available||4. Bonus options||4. Premium protection options||4. Income payment tenure|
|Option to add the spouse||5. Portfolio options & management||5. Bonus additions||5. Investment mix/safety|
Most of these terms have been explained below:
1. Tenure of Insurance:Will the policy cover you only for a defined period of say 5-15 years or until the age of 99. A whole life policy can be useful if you intend to use this to create an inheritance for your family.
2. Return of Premiums:If you are not too inclined to invest in term plans because there is no “maturity benefit” at the end of the term, you may consider investing in a plan that guarantees the return of premiums. You get a dual advantage of risk cover during the term and a return of all premiums at the end of the term.
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3. Increasing Sum Assured:You are single with a modest income, but you foresee your income increasing steadily over the years because you work in a profession that is in high demand. You plan to marry and have children over the next few years which implies the necessity of securing their future as well. Any plan that offers you the flexibility to start with a lower sum assured (and payable premiums) and increases with the stage of your life can be good for your pocket.
4. Payment Frequency:Does the policy allow flexible premium payment options? Can you opt for monthly or quarterly payments that can coincide with your income dates so that you do not have to organize a lumpsum amount once a year? Can you change this frequency depending on how your financial condition evolves? Look at this parameter because you must pay your dues on time to keep the policy in force.
5. Payment Mode:Can you pay the premiums online? Is the insurer’s site friendly, hassle-free and convenient while making payments? Does it offer different digital payment options such as credit or debit cards, net banking, UPI etc?
6. Investment Cum Insurance:Is the policy a pure term plan or does it come with an investment component that grows over time? A combined plan can give the dual benefit of protection and wealth creation
7. Add-on Covers/Riders:Riders such as child benefit, disability due to accident, critical illness etc provide a lump sum amount over and above the base sum assured.
8. Premium Protection:In Premium protection plans, future premiums are waived off in case of untimely demise or permanent disability. In case of untimely demise, the family will receive the sum assured immediately. The family will receive the fund value at the time of maturity-either in regular income streams or as a lump sum.
Compare Life Insurance Quotes
Regardless of which type of plan you are comparing, you should always look at the claim settlement ratio and solvency ratio of the insurer. A claim settlement ratio of 95%+ and a solvency ratio of 2.5 is a good sign. Some insurers including Canara HSBC Life Insurance provide credit rating as a sign of financial stability.
All insurance policies are not the same and therefore it is important to compare the life insurance quotes with the features and benefits of the plan. Comparing quotes of similar policies is recommended and wherever there is a disparity in rates, finding the unique benefit is necessary.
Insurance policies are sold through insurer’s branches, bank branches (bancassurance), tied agency channels, and online. Online policies could be cheaper as compared to policies sold via other channels. Do your homework and sign up for the plan that best fits your needs.Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article as conclusive in nature. Readers should research further or consult an expert in this regard.