Today’s actions will help you secure your tomorrow. This statement becomes more relatable when you look at retirement. Being financially free and having a huge coverage amount takes away the worries. It is also important to note that being tied down by monetary responsibilities and avoiding fun is not the best way to achieve financial freedom. This is why your portfolio needs to have a balance of debt, equity, and insurance.
Life insurance is an important investment that mitigates risk, provides peace of mind, and makes dealing with health and related woes easy. Let us understand what it is all about and the different types of life insurance choices out there:
Life insurance is an insurance policy providing monetary coverage for your life against the premiums that you pay. There are several types of life insurance policies. They are:
– Term life insurance
– Whole life insurance
– Retirement plan
– Unit-linked insurance plan
– Endowment policy
Now, let’s understand each of the types of life insurance policies.
1. Term life insurance: As the name suggests, this type of life insurance offers coverage to you for a specific term. The policy can provide secure cover for your life only up to 40 years of tenure.
Risk: The risk involved here is low.
It can provide coverage up to ₹1 crore* for an annual premium of ₹15,000 p.a.*
2. Whole life insurance: This is a type of life insurance plan offering coverage for your life until the age of 100 or your death, whichever is earlier. Your nominee is the sole beneficiary of this plan since they get the sum assured upon your death.
Risk: It is quite low.
The ideal time to buy this policy is when you are young, as the premium is much lower then.
3. Retirement plan: This is a type of life insurance policy that provides coverage and investment until you retire. The goal of such a plan is to help you retire easily without worrying about retirement.
Risk: Depending on the type of annuity plan you pick, the risk here is low to moderate.
The ideal time to purchase is when you have a sufficient flow of income, allowing you to invest more.
4. Unit-linked insurance plan: This instrument provides dual benefits: coverage and help you grow your investment.
The premium you pay goes toward investing in an asset class of your preference, such as debt, equity, or a mix of both, and the remaining premium goes toward covering your life.
Risk: It is quite low to high ranging from the type of investment portion you undertake.
5. Endowment policy: If savings are important to you, you can look at an endowment policy. This policy offers a lumpsum amount upon maturity, savings, and insurance.
Risk: Quite low.
The best time to buy is once you are earning a steady source of income.
Various types of life insurance policies provide many benefits. However, the best results are obtained by combining coverage, investment, and savings.
