Tips For Choosing the Right Insurance Policy
How To Choose the Right Insurance Policy
Life long coverage! When John who got job at his 25 decided to take a policy, this whole life policy is what attracted him the most. He went for that. He is paying premium for the last 20 years. But he didn’t get any concessions so far. Even though he puts aside a fair amount for policy every month, ever since the beginning of his career, he didn’t get a single penny so far for any emergencies. Nor is he going to get any in the future too, he knows. Why did this happen? Because, he chose the wrong policy!
The nominees will get the benefits of a whole life policy only after the death of the policy holder. Not just that; a whole life policy demands its owner to pay premiums even after retirement. Nowadays, everyone knows the significance of policies and how essential it is for individuals. But majority doesn’t know which policy suits the best for them. Almost all people go for a policy that the insurance agent prescribes them.
The fact is that there are policy holders who hardly have any idea regarding the kind of policy they have. They don’t know if they have an endowment policy or a term policy or a ULIP policy. It’s quite natural that the agent tries to sell off policies that will be beneficial to them and not to the customers. The question of ‘whether this policy suits me?’ or ‘do I need this policy’ won’t arise at all. Financial experts say that this is a wrong trend. Each policy has a distinctive purpose. An individual must choose a policy only based on his requirements. Then only the policy holder will get the maximum benefit out of the policy.
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Different Types Of Insurance Avialable
Before choosing a policy, you need to study thoroughly what all are the policies available in the market and what all are its merits and demerits. This will help us take a wise policy decision. There are basically two products so far as insurance is concerned. They are Term Assurance policies and Endowment policies.
Term Assurance Insurance Policy:
These are policies having a particular duration. Here, the premiums are lesser when compared to other policies. The nominees will get the policy amount, if the owner dies within the policy period. If the owner doesn’t die within the policy period, there won’t be any concessions. In crux, term policies assure coverage for the least premium amounts. The single thing that’s worth noticing about this type of policy is that, the premium amounts will be lost, if the owner doesn’t die within the policy period.
Actually, term assurance is a pure insurance product. But majority discards this for fear that they may loose the premium amounts. The main draw of term assurance policies is that high coverage amounts can be availed at the lowest possible premiums. Those who have taken up the responsibilities of family at a pretty young age and those who are engaged in perilous jobs can go for term assurance policies that ensure security to their family even if something happens to them. Those who have high cost of living too can choose term assurance policy to ensure the safe future of their family. Now, term assurance policies are there which gives the premium amounts back even if the policy holder doesn’t die within the policy period.
Endowment Insurance Policies
Pure endowment policies are those which ensure benefits only when the policy holder is alive. Since these doesn’t ensure any coverage after the policy holder’s death, it can be said that this type of policies do not fulfill the real intentions of insurance. So what’s most in demand in market these days are the ones that blend the pros of both term assurance and endowment policies. These are called Endowment Assurance policies. The major policies available now are Whole Life Policy, Money Back Policy, Unit Linked Policy, Joint Policy and Term Assurance Policy. Riders that ensure best benefits at least premiums are available along with these policies.
Money Back Insurance Policy:
Money back policy is the most popular among the traditional policies. This insurance coverage is for a limited period. In this duration, a fixed amount will be given back to the policy holders, in fixed intervals. Actually, this is one of the main draws of money back policy. For example, if the policy is for 20 years, the policy holder will get 20% of the assured in the 5th, 10th and 15th years. The rest 40% and bonus can be availed when the term completes. If the policy holder dies within in the term, without considering the survival benefits issued so far, the nominee will get the entire sum assured. The money that the policy holder gets from time to time from the Money Back Policy can be used for other emergencies that may come up in the course of life. Or else it can be deposited fruitfully for turning it into premium amounts for the years to come. The value of money decreases considerably over the years due to inflation. So, financial experts point out that getting the money back from time to time is a good practice.
Money back policy is a coverage as well as a deposit means. Since a fixed income can be ensured, this is safe as well. But the thing to be kept in mind is this that money back policies demand huge premium amounts. However, money back policy is the best for middle class people to meet their unexpected expenses and to ensure the financial security of the family in case of the policy holder’s untimely death.
Life Insurance Options : What Is Endowment Life Insurance?
ULIP Insurance Policy:
ULIPS are of great demand in the market, now. ULIPS are more of fixed deposits that accelerate income means rather than a mere insurance coverage. But this accelerated income means include grave danger possibilities too. Since this offers life coverage too, more amounts need to be paid as premiums than what one should pay for an equivalent mutual fund. Based on loss probability, ULIPS offers around four programs to choose. These four programs differ in the deposit proportions in their share and bond. Even thought the loss probability decreases with a decrease in share deposit, it will decelerate the income flow too. Most people in Kerala go for funds that require them to deposit in share and will result in accelerated income flow. But if the stock market crashes, you will loose the entire money you’ve deposited. ULIPS are best for those who are ready to take up the risk of unexpected losses through market crashes. Financial analysts are of the opinion that since deposits like shares bring about the best benefits, chances are less for ULIPS to result in loss of money. But only long term deposits are going to work.
We have already discussed about whole life policies. The main drawbacks of whole life policies are they require the policy holder to pay off the premiums even after the income means cease and that the policy holder cannot enjoy any of the privileges or benefits. Life tenure has considerably augmented nowadays. Thanks to the medical advancements! Imagine someone taking a policy of Rs. 2 lakhs when he or she is 25. Imagine that he dies when he is 100. The value of the 2 lakhs that the nominees get after the death of the policy holder will be negligible. Inflation is the villain. The life coverage policy of father will be less significant when children start to earn a life of their own. So it’s advisable to go for policies that offer coverage up to this phase of life, according to experts.
Group Policies too are there that help workers, employees of institutions, people who belong to minority classes etc. acquire maximum coverage at comparably lesser premiums.