What is a Family Life Insurance Policy?

Let’s assume you have a family of four members between the ages of 18 years and 65 years, and each of you need to be covered by a life insurance policy. You have two options here – each family member can get an individual life insurance policy which means four individual policies and premium payments, or you can opt for a family life insurance policy that covers all four under a single plan. Which one do you think would be a better option?

You already know how important it is to have life insurance coverage for your entire family, and that is exactly what a family life insurance policy does. All you need is a single policy that has been carefully planned, considering the needs of all the members. Moreover, having four individual policies to cover all the family members can be much more cumbersome than a single life insurance plan that offers sufficient coverage for each person and also enables you to manage the premiums through a single premium payment.

A family life insurance plan is also not restricted to a single type of life insurance policy; you can choose from a variety of policies depending on what insurance goals you all need to meet!

Which Life Insurance Plan Should You Buy for Your Family?

Term Insurance Plan

Term insurance plans are the simplest and the most basic type of life insurance policy that offer life insurance coverage for a limited “term”. Pure term insurance plans only offer a death benefit wherein the sum assured is paid out to the family of the policyholder in the event of the policyholder’s demise within the policy period. This sum assured death benefit could help secure the financial future of the family members of the late policyholder, which becomes even more crucial if the policyholder was the sole earning member in the family.

When you buy a term insurance plan, you can choose from flexible policy terms and premium payment options and also plan the coverage of the term insurance plan as per your family’s needs.

Savings Plan

A savings plan combines the benefits of systematic long-term savings and a life insurance cover to offer financial security to you and your family. You can select the policy term and the premium payment term to accumulate your savings over a certain number of years. On maturity, you receive the guaranteed sum assured, either as a lump sum or as a regular income, depending on your choice of the payout mode.

There are different types of savings plans such as guaranteed savings plans or a monthly saving plan to choose from since everyone’s savings goals are not the same. Hence, the policy term or the tenure for which you want to save your money and how you want to pay the premiums can help you personalise your savings plan to meet your financial goals. A savings insurance plan will also pay out a guaranteed sum assured to your family as a death benefit in case of your untimely demise during the policy term.

Retirement / Pension Plan

A retirement plan or a pension plan helps you accumulate funds during the policy term and plan for your retirement years. And once you retire, not only do you benefit from a guaranteed regular income in the form of monthly payouts to support yourself and your family but also a life insurance cover to protect your family in case of an unfortunate event.

Retirement insurance plans work well as a replacement for a regular salary as the regular income paid out during your retirement years can be used for your essential expenses, emergency expenses and also for planning any major financial goals such as starting a business, paying for your child’s higher education and so on.

The amount of regular income you receive through your retirement insurance policy will have to be planned well in advance when you purchase the plan. You can do so by factoring in the various costs and expenses that need to be taken care of in your retirement years.

Unit-Linked Insurance Plan (ULIP)

A Unit-Linked Insurance Plan or ULIP, as it is commonly known, is a market-linked investment-cum-insurance policy that helps you create an investment plan to fulfil your future financial goals. The insurance component of the ULIP will secure your family financially in case of your unfortunate demise so that they can sustain themselves in your absence.

The premiums of a ULIP plan are split between the insurance cover and the investment so that you can enjoy insurance coverage while growing your wealth. One of the major benefits offered by a ULIP policy is the choice of ULIP funds that you can select for your investment purpose. Furthermore, if you feel that you need to alter some aspects of your investment, you can easily switch between the fund options and find something that is more fetching for your investment goals.

Since the returns on a ULIP investment are linked to the market, it is advisable to select your investments as per your risk appetite and your financial goals.