Insurance is a subject matter of solicitation, but insurance agents rarely live up to the inherent meaning of this rule. You may be familiar with life insurance agents pestering with policies ranging from child policies to pension policies. If you fall for them you might not get the best deal. You should not get carried away by your agent’s advice as such advisors usually advocate more for their commission, although subtly, than for the benefits of the customer. There is always an undertone of “push sale” in their demeanor. Almost always the agent would talk about some feature or benefit which would appear to be a great one on the face of it. Nevertheless, to get the best deal out of your life insurance policy, you need to compare the perceived return and benefits of a policy with other options available in the market.
Term life insurance is known as pure life insurance. Such policies are designed for offering pure life coverage to subscribers against a predetermined charge per annum which is also known as premium. You can pay this quarterly, biannually, annually, and even monthly. God forbid, if something unforeseen happens with your life then your nominee becomes eligible for the amount of coverage in your policy. This is similar to auto insurance and home insurance policies where the insurer would reimburse your claim only if the automobile is involved in an accident or the home faces natural or other calamities.
The insured can secure a hefty life coverage as the premium payable for such insurance policies are often lower than the same in traditional insurance policies which we will discuss later. Here the insured amount is paid to the family of the deceased for their sustenance. Moreover, almost all top life insurance companies offer such insurance policies, though agents may not advocate for them.
These policies are designed to circumvent the financial hardship posed by the unfortunate death of the insured person or policyholder. If the person is living, neither the insured nor the family will get anything. Nevertheless, you get the much-required peace of mind when you subscribe to a term life insurance policy. It acts as a source of finance that can take the place of your income when you are no more.
If you acquire a terminal disease during the contract period and yet continue to live, even the best life insurance policy may not renew the contract with you after the expiry of the contract period. This is because they would become aware of the fact that such a terminal illness is very likely to cut short your life. However, there are some new term insurance policies which also have a critical illness coverage. But you have to pay for it since the start of the contract.
While subscribing to term life insurance, you should have an idea about the expenses that your family would need to incur in your absence. This must include debt incurred by you, if any, mortgages, if any, requirements arising out of higher studies of your children, fund needed to take care of the elderly parents as well as dependents like spouse and children, etc. You should also keep it in mind that if you die even one day after the end of the contract period, your family will not get any benefit. Therefore, it is in your family’s interest that you should select the tenure in such a way that it covers the period when you are likely to discharge all the major responsibilities like education and marriage of your children. Once these responsibilities are taken care of you can live off your savings and lead a retired life.
Traditional policies are more like investment schemes combined with an element of insurance. These are also known as endowment policies. These policies come in different names and have different features. The distinctive feature of such policies is that you can get back a defined amount of money, known as sum assured, even if you continue to live. If you die within the contracted period, your family will get the sum assured. So these policies cover the risks to the life of the insured person while at the same time investing his money in suitable instruments so as to give him or her a decent return on investment upon completion of the contract.
You will not have to forgo your hard earned money. You will get the sum assured at the end of the period even if you continue to live. If something happens to you, your family will also get the assured sum.
The premium of such policies is always much more than term insurance policies. You have to lock some fund in this policy even when you have the opportunity to have better yields on your money.
You can either go for a traditional insurance with hefty premium or a term insurance with lower premium combined with an investment in a suitable scheme. For investment purposes, even small savings schemes may offer better returns than traditional insurance policies.
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