The common dilemma that is faced by an individual is to understand the need of insurance. Then comes to choose what type of insurance he should go for, and what the things that one should keep in mind. It is understood that every person does not hold all the information he needs to make the best decision.
Life Insurance can be categorised in the following:
1) Term Insurance policy is the starting point of insurance. The basic idea is to eliminate the risk of sudden death. Every individual has some responsibility financially to provide for loved ones, a security to take care of the liabilities. With term insurance you can ensure that these will be taken care off in your absence. Premium for this type of policies is very low as you do not get money back on maturity.
2) In a whole life insurance policy, is a saving plan, where you pay the premiums for a longer period, until your death (mostly), so that you leave an inheritance to your loved one. This policy remains in force for the whole term of the insured’s life. That is why it is called a Whole Life Insurance plan.
3) Money back policies provide a death benefit and also build cash value over the years. Most of us prefer these types of life insurance policy. The insurer collects premiums and provides a return every interval as agreed by lending and investing.
4) ULIPs are a combination of mutual funds and insurance. They primarily invest in equity market and returns vary as per the market. If equity markets perform well returns are good and vice-versa. The Sum Assured is usually 5 or 10 times the Annual Premium Amount.
5) There are also other types of policies like Child Plan, Retirement Plan, Pension Plan, Child Education Plan etc., They are just combinations of features of policies discussed above in different proportions.
You should always buy insurance policy with a purpose. If you do not have any dependent, there is no need to buy life insurance. You will be better off with a good health insurance. But if you do have dependents and then the safety to your family need to be sustained. Hence we should definitely need to buy life insurance.
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