Insurance Planning is concerned with ensuring adequate coverage against insurable risks. Calculating the right level of risk cover is a specialized activity, requiring considerable expertise. Proper Insurance Planning can help you look at the possibility of getting a wider coverage for the same amount of premium or the same level of coverage for the same amount of premium or the same level of coverage for a reduced premium. Hence, the need for proper insurance planning.

Insurance, simply put, is the cover for the risks that we run during our lives. Insurance enables us to live our lives to the fullest, without worrying about the financial impact of events that could hamper it. In other words, insurance protects us from the contingencies that could affect us.

How much Insurance do I need?

This is the most vital and important question in financial planning when it comes to purchasing insurance. It depends on your Assets, Liabilities and your Future Goals.

Why Insurance

Type of Insurance

Term Insurance

Term life insurance are the most basic & purest form of life insurance . It is the life insurance that provides coverage at a fixed rate of payments for a limited period of time, the relevant term. Term insurance functions in a manner similar to most other types of insurance in that it satisfies claims against what is insured if the premiums are up to date and the contract has not expired, and does not provide for a return of premium if no claims are filed.. This is purely risk protection. All premiums paid are used to cover the cost of insurance protection thus they provide life cover with no savings / profits component. The term or the time period may be one, five, ten, twenty years or longer

Things to Consider Before Taking Term Insurance

Endowment Plans

Endowment plan is a combination of insurance and investment. In term plan which is a pure insurance there is no maturity benefit. It means if a person dies during the term of policy then only his beneficiaries will get some money otherwise at maturity, at the end of the term there is no benefit.

In endowment because as it is a combination of insurance and investment it means if during the term of policy that life assured dies in such case beneficiaries will get the benefits. Benefits are sum assured under the policy and also if there is bonus or guaranteed returns or something that will also be paid to the beneficiaries.

However if the person survives throughout the term of policy at the time of maturity whatever sum assured plus other benefits in form of interim bonus or vested bonus that will be paid to the person himself who has bought the policy.

Policies are typically traditional with-profits or unit-linked (including those with unitised with-profits funds).

Endowments can be cashed in early (or surrendered) and the holder then receives the surrender value which is determined by the insurance company depending on how long the policy has been running and how much has been paid into it.

Unit Linked Insurance Plan (ULIP)

ULIPs are hybrid products that mix life insurance and investments. Like any other life insurance product, these offer life cover along with investment. However, it is left to the policyholder to make the investment choice from the available fund option, thereby transferring the risk of investment to the policyholder. Though these policies can be more profitable than a traditional insurance policy; they also have higher risk.

ULIPs are a variant of the traditional endowment plan. They pay out the sum assured (or the investment portfolio if its higher) on death/maturity.

ULIPs differ from traditional endowment plans in certain areas. As the name suggests, performance of ULIP is linked to markets. Individuals can choose the allocation for investments in stock/debt markets. The value of the investment portfolio is captured by the NAV (net asset value). To that end, there are many similarities between ULIPs and mutual funds. ULIPs differ in one area, they are a combination of investment and insurance, while mutual funds are a pure investment avenue

Whole Life Insurance

Whole life insurance is a life insurance policy which is guaranteed to remain in force for the insured's entire lifetime, provided required premiums are paid, or to the maturity date. Premiums are fixed, based on the age of issue, and usually do not increase with age. The insured party normally pays premiums until death, except for limited pay policies which may be paid-up in 10 years, 20 years, or at age 65. The main feature of a whole life policy is that the validity of the policy is not defined so the individual enjoys the life cover throughout his life.

Thus it is a permanent form of life insurance, intended to last for the “whole life” of an insured.  It is an insurance contract between a person and an insurance company, which in return for regular premium payments made to the insurance company, the company promises to pay a specified death benefit to the owner of the policy upon death of the insured.  Whole life insurance also accumulates a cash value, which can be accessed by the owner, during the life of the policy.

Money Back Policy

The money-back policy from Life Insurance Corporation in India is a popular insurance policy. It provides life coverage during the term of the policy and the maturity benefits are paid in installments by way of survival benefits in every 5 years. The plan is available with 20 years and 25 years term.

A money back policy is a variant of the endowment plan. It gives periodic payments over the policy term. To that end, a portion of the sum assured is paid out at regular intervals. If the policy holder survives the term, he gets the balance sum assured. In case of death over the policy term, the beneficiary gets the full sum assured.

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