How to choose the right life insurance policy?

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Life insurance is critical to secure the future of your family. It provides a much-needed cushion to the family in case of the sudden demise of the policyholder. The timely financial support provided by a life insurance policy ensures that your children can live their dreams even when you are not around. Here is a lowdown on different types of life insurance policies to help you choose the right policy:

Term insurance

Unlike other life insurance plans, term insurance only offers risk cover and therefore they are the cheapest plans. The premium here depends on age, sum insured and term of the policy.

Traditional or endowment plans

Under endowment plans, a policyholder is paid a sum assured along with accrued bonus at the end of the term of the policy. The policy also offers risk cover during the term of the policy. Traditional plans are not, however, the cheapest option. The return from such policies is generally in the range of 5 to 7%. Some of the common endowment plans include the following:

Money-back plans: These plans periodically return a certain percentage of the sum assured instead of giving a lump sum at the end of the term.

Whole life plans: These are a type of endowment plans that offer coverage for the policyholder’s lifetime. The policy offers a death benefit to beneficiaries if the policyholder dies during the term of the policy.

Unit Linked Insurance Policy

Unit Linked Insurance Plans (ULIPs) is an investment cum insurance product, which protects you against the risk of dying early. These plans invest money either in the stock markets or debt instruments through different funds in-built into the policy. It is suitable for those who find it difficult to keep insurance and investment separately.

Annuity Plans

An annuity is a type of insurance policy that offers a regular stream of income for a fixed period. It is a contract that provides regular income for a fixed period or over a lifetime. It protects one from outliving their retirement savings.