Once you have decided on how much insurance is good for you, you
need to identify which life Policy you should buy. Life insurance comes
in various formats so as to fit to the variety of needs of customers.
The various types of insurance policies available include Term
insurance, money back policies, endowment policies and Unit Linked
Insurance Policy (ULIP). The best policy for you depends on your premium
paying ability, your Risk tolerance and the duration of your need.
Duration of Coverage
need to define for how long you would want the insurance company to
cover your risk. This is basically defined by the term of the policy.
The policies typically come in various terms of 20 to 30 years. The term
would largely depend on your current age.
you intend to combine investments with insurance? Insurance companies
offer policies which not only meet your insurance needs but also help
you manage your investments. The annual insurance Premium
that you need
to commit in such policies is much higher than what is required for a
term life insurance policies. Endowment, money back and unit linked
insurance policies would help you manage your investments along with
providing risk cover. If you are just looking for pure risk coverage, go
for a term plan. A term plan usually proves to be cheaper than other life insurance
Your Personal Risk Tolerance
personal risk tolerance would determine where you desire your
investments to be made. Whether you want certainty on the quantum of
return on your investment or you are aggressive and expect as high a
return as possible. You can buy a ULIP over an endowment or a money back
policy. Under a ULIP policy, the Insured has the choice to decide where
the insurance company should invest his premium. He has the liberty to
be more aggressive and can choose to invest the entire investable
premium into equity. So, ULIP gives the investor the freedom to choose
his investments depending on his personal risk tolerance.
Timing of Receipt of Sum Assured
do you want the sum Assured to be distributed over time? Whether you
want a single lump sum payment or you want the insurance company to give
it to you in parts distributed over time during the policy term? A
money back insurance policy would provide the insured with regular
payments during the term of the policy in case he survives. If you buy a
20 year money back policy, you can expect to receive 20 percent of sum
assured each after 5, 10, 15 years, and the remaining 40% and the
accrued Bonus (if any) would become payable after the completion of
If you buy an Endowment Plan or a
ULIP, the Sum Assured would be received only after the completion of the
policy. You have the choice of either received the sum assured as lump
sum upon completion of policy term or converting it into annuity.
can take help of insurance comparison websites to search for the best
online insurance that meets your insurance as well as investment needs
at the lowest premium cost.