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Insurance
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New to Insurance? |
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In these uncertain and high-maintenance
times, Insurance is no more a luxury but an absolute necessity. Whether you are
a high-flying CEO or a humble blue collar worker, someone probably depends on you.
Life Insurance can broadly be categorised as term, money back or unit linked.
Term insurance provides cover over a pre-determined span of time, with a fixed rate
of premium. It is the most basic, plain and inexpensive method of insurance. But
while the premiums are the cheapest, the insured persons get nothing back in their
lifetime, with a pay-out to the beneficiary happening only in the event of death.
Endowment policies also provide cover for a fixed period. However, while they will
also pay out the sum assured in the event of death, they will give the policyholder
some return periodically or at the time of maturity. Naturally, the premiums are
substantially higher.
ULIP or Unit Linked Insurance Plan is a happy balance between insurance and investment.
In a sense it is like a Mutual Fund where the value of the policy varies according
to the NAV. ULIPs invest in equity and/or debt. ULIP is an excellent future-planning
tool.
Currently, premium paid on certain Life Insurance policies are also tax-deductable
under Section 80C. Which makes it all the more lucrative to take insurance.
The four basic investment objectives of insurance are Protection, Retirement Planning,
Savings and Child Plans.
Before choosing an insurance plan, one should take into consideration factors such
as age and future objectives. For example, term insurance is best suited to someone
of a younger age and a lower income. Middle age merits a mix of term, endowment
and ULIP to ensure sufficient cover as well as long-term investment. Child Plans
are an excellent tool to take care of future events such as education and marriage.
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