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Today, a vast number of options exist to help you with your financial planning. From investing for wealth creation to safeguarding your loved ones’ financial wellbeing with insurance products such as a child plan & a ULIP policy – avenues towards building a secure future are plenty. But in your effort to create wealth, you should not compromise on the protection aspect. Protection forms the base of a financially stable future. Therefore, it is crucial to own a life insurance policy.
Life Insurance plans can broadly be categorised into two types. One is purely about risk coverage. The other is a combination of insurance and investment. The second broad categories can further be broken down into seven different types of insurance plans.
1. Term Life Insurance Plan:
This life insurance plan offers monetary compensation to the beneficiary only if the policyholder meets with an untimely demise during the policy period. If the insured survives until the policy end date, the coverage ceases. There may be variants of term insurance where premium is returned upon maturity of policy.
This plan does not feature any investment component or maturity benefit. Therefore, it is the cheapest form of life insurance.
2. Whole Life Insurance Plan:
This kind of insurance plan ensures coverage for a lifetime, provided the policy is in force. Apart from providing a death benefit, a whole life insurance policy also contains a savings component. The cash value accumulates on a tax-advantaged basis. You may choose to withdraw the accrued cash value or even take a loan against it. However, in case of the insured’s unfortunate demise before the loan is repaid, the death benefit the beneficiary receives is proportionally reduced.
3. Endowment Policy:
In an endowment plan, the insurer provides a pay-out to the insured if he or she survives until the maturity date. Otherwise, the sum assured is paid to the beneficiary.
This insurance option offers dual benefits of protection and savings. Along with providing life cover, it also helps the policyholder save regularly over time. A lump sum amount accumulates by the time the policy matures. Most insurers also offer guaranteed additions to the invested sum or declare bonuses, increasing the returns from such policies.
Endowment plans are also commonly known as traditional plans since these are not market-linked. While these serve as investment vehicles, the risk associated is far lower than most investment products. Although more expensive than a term plan, endowment plans can help achieve financial goals like a child’s higher education, marriage, buying property, etc.
4. Money-Back Insurance Plan:
In a money-back plan, the money you invested as premiums comes back to you at regular intervals as a guaranteed income. You are also eligible to receive bonuses declared by the insurance company. Such policies can meet your interim needs for funds.
5. Retirement Insurance Plans:
With these plans, you can create wealth and get a fixed income after your regular salary stops. This is because the premiums you pay build up a sizeable amount through the accumulation phase of such plans. After that, during the vesting period, you start getting regular pay-outs from the accumulated sum.
In case of the policyholder’s unfortunate demise during the accumulation phase, the nominee receives a death benefit. The annuity plans also allow you to make provisions for your spouse to continue receiving the income after an unwanted event.
6. Unit Linked Insurance Plans (ULIPs):
ULIP benefits are not limited to protection and wealth creation. Your premium is divided into two parts. One part goes towards securing your life cover. The other is invested in market-linked instruments.
If you survive the ULIP policy period, you receive the prevalent market value of your investment. The capital market offers the possibility of generating inflation-adjusted returns through long-term investment. Insurers also add extra units to your investment as loyalty rewards when you remain committed to your policy for a long duration. A ULIP plan calculator helps you gauge the amount you need to invest in building the wealth required to fulfil your life goals. Also, in financial emergencies, you can withdraw a part of your accumulated units after the five-year lock-in phase.
In case of an undesirable event, your nominee receives a lump sum amount.
7. Child Plans:
You can invest in the plan in your child’s infancy and withdraw the savings once your child reaches adulthood. If an unwanted event occurs during the policy period, the child plans’ death benefit takes care of your child’s financial needs. But most child plans also continue premium waivered until maturity, providing a pay-out to your child to meet their future monetary requirements.
All types of insurance plans come with a specific benefit. With so many available options, you need to select a life insurance plan that best suits your family’s needs. For example, a term plan is essential if you are your family’s primary breadwinner. Likewise, if you are likely to have financial dependents even at an advanced age, a whole-life insurance plan may be helpful.
However, it is advisable to look into the insurer’s credibility and not settle for a policy based only on low premium rates. Tata AIA Life Insurance premiums are not only affordable, but the company has also paid 99.06% of the life insurance claims in FY20. Moreover, as of June 30, 2020, the company’s solvency ratio stood at 2.14, well above the IRDAI-prescribed minimum of 1.50. Such high figures indicate the insurer’s capability to honour its commitments towards policyholders. Thus, with a TATA AIA Life Insurance plan, you can rest assured of timely pay-outs in your hours of need.
Insurance cover is available under the product.
The products are underwritten by Tata AIA Life Insurance Company Ltd.
The plans are not a guaranteed issuance plan and it will be subject to Company’s underwriting and acceptance.
For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.
This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
Every effort is made to ensure that all information contained in this podcast is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER
THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.
Past performance is not indicative of future performance.
All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.
Please make your own independent decision after consulting your financial or other professional advisor.