We live in times of uncertainty. Whether it is our jobs, earnings, or life in general, things are uncertain. We face uncertainty about what will happen to our loved ones if we are no longer around to care for them. Hence, it is always better to create wealth for the future to help our loved ones survive and make a living even in our absence.

 

Investing in a life insurance policy is the way to create financial stability for your family and dependents. This will be useful in adverse conditions or if unfortunate events occur. An insurance policy is beneficial to both the insured and his/her family.

 

When applying for a guaranteed¹ or non-guaranteed life insurance policy, customers receive a life insurance illustration with the policy. It portrays the cash value component, guaranteed¹ cost of insurance, and the age up to which the insurance holds good. The benefit illustration shows how returns on the money invested in the policy will be earned or calculated. The projected investment rate of return depicted in the benefit illustration can be guaranteed or non-guaranteed¹. Therefore, before buying the policy, you should read it carefully.

 

Usually, most life insurance policies are good to continue until the age of 85-100. Additionally, one can customize the scheme to pay premiums across the policy tenure or within a shorter period. However, life insurance companies will still want to ensure that the insurance policy illustration was given to a client.

 

There are many life insurance schemes available in the market. One common factor among them is that all of these cover the financial risks associated with the insured individual’s death. But there are also some other distinguishing factors. These are guaranteed¹ premium amounts and non-guaranteed premiums. One has to choose the policy based on what suits them best. Choosing this depends on the buyer’s financial needs, health conditions, income, number of dependents, etc.

 

Overall, there are many life insurance schemes offered by various insurance companies. Among these types, there are two particular patterns of schemes available for customers – guaranteed¹ and non-guaranteed life insurance. Let us take a look at these two life insurance schemes. Also, let’s see which one is better.

 

What is a guaranteed life insurance policy?

 

Guaranteed¹ life insurance ensures continuity of the insurance cover if the insured pays the premium regularly without deviation. This ensures the life insurance scheme will not lapse unless a premium is not paid. A distinctive benefit of the guaranteed¹ life insurance policy is that the premium amount of such plans remains the same throughout, even if the insurance company increases the fees and other charges during the policy term.

 

A guaranteed¹ life insurance policy ensures that the insured person will receive a guaranteed¹ rate of return on his/her investment. This means that the buyer’s investment will grow as described, and the insured will receive the invested amount as stated in the benefit illustration. Also, if the life insurance policy offers guaranteed¹ benefits to the insured, it will be clearly marked as 'guaranteed' in the benefit illustration table.

 

What is a non-guaranteed life insurance policy?

 

A non-guaranteed life insurance policy refers to a limited term insurance policy, where the premium amount is unpredictable and could fluctuate. This means if you buy a non-guaranteed life insurance policy, the amount you pay as a premium for the first couple of years of the policy could increase later according to the calculations based on the current market scenarios. Hence, the premium amount for a non-guaranteed life insurance policy may not remain the same for the insured throughout the policy tenure.

 

For instance, if you buy a non-guaranteed life insurance policy for 20 years, you may have to pay a fixed amount of money as a premium for the first five years. For the remaining 15 years of the policy tenure, the insurance company will charge you a higher premium, depending on the market conditions of that period. This will result in you paying more money to the insurance company as a premium for the same policy, but the benefits will remain the same, i.e., those offered while purchasing the plan.

 

 

Conclusion

 

When you buy a crucial policy, such as a life insurance scheme, you should know the facts of the policy, as this will help you understand the benefits and expenditures associated with the plan throughout the tenure. Before opting for a plan, you must gather all details about these policies, depending on your financial status, income, and family members’ requirements.

 

L&C/Advt/2021/Jun/0838