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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 insurance policy for you depends on your premium paying ability, your Risk tolerance and the duration of your need.
You 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.
Do 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 policies.
Your 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.
How 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 policy term.
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.
You 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.