Investing can change your life for the better, and the sooner you start, the more you’ll have in your investing account in the long run. But many people mistakenly think that unless they’ve got thousands of dollars lying around, there’s no good place to put your money. The fact is that even if you only have a small amount of money, you can start investing.
Insurance policies safeguard you from unforeseen risks and dangers, making sure that you and your assets are protected. There are several insurance policies that you can buy at affordable prices today. But do you know all the different types of insurance policies available? Let’s go through the multiple policies one-by-one.
Why are finance websites useful?
Not everyone has a background in finance and not everyone can afford a financial adviser or an investment banker.
Lucky for all of us, we live in the era of the Internet. For that reason, we have compiled a list and by choosing the one that appeals most to you based on your risk tolerance — or by mixing and matching multiple ideas — you can get on the path toward long-term financial security and build up a nest egg that you’ll be able to tap whenever you need it. You could get a free understanding by clicking here and filling this form. An investment banker can help guide you to make the correct choice in developing your personal investment strategies.
Whether you have just started to learn, or you are already an expert in the world of finance, business, and investments, these resources will help you stay on the top of the game.
Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. An entity that provides insurance is known as an insurer, insurance company, insurance carrier, or underwriter.
Common terms in insurance:
Proposer (also known as Policy Owner) – Purchases the policy and pays the premium. If this person dies, it triggers the death benefit payout.
Insured – Person whose life is being insured. It is the person who obtains or is otherwise covered by insurance on his or her health, life, or property. The insured in a policy is not limited to the insured named in the policy but applies to anyone who is insured under the policy. For example, if Karan buys a policy on his own life he would be both the proposer/policy owner and the insured. If Karan’s wife, Jyoti buys the policy on Karan’s life then Jyoti is the proposer/policy owner and Karan is the insured.
Beneficiary – Person(s) who will receive the death benefit in the event of the death of the insured.
Insurer – The life insurance company that collects the premiums and pays out the death benefit to the beneficiary.
Life insurance agent – Assists the proposer/policy owner in selecting the right type of policy with the right insurance company while getting the lowest rates (premiums).
Underwriter – Works for insurer. Reviews and evaluates the application for insurance.
Basic process to get life insurance
Proposer/Policy owner works with a life insurance agent to select an insurer to apply with.
The life insurance agent submits an application on behalf of the proposer/policy owner.
Underwriter at insurer reviews the application and assess the risk of the insured.
Underwriter responds with an applicable rating and associated premium (cost).
Proposer/Policy owner pays the first premium which puts policy in force.
The sum assured (SA) is the amount of money an insurance policy guarantees to pay up before any bonuses are added. In other words, the sum assured is the guaranteed amount the policyholder will receive. This is also known as the cover or the coverage amount and is the total amount for which an individual is insured.
Types of Insurance Policies
1. Life Insurance – Life insurance policy secures the future of your family and provides for them if something were to happen to you. There are numerous policies that also give maturity benefit if you survive the policy term, to fulfill long-term financial goals. Life insurance plays a vital role if you are the sole earner of the family and you have dependents. In the absence of such insurance, your family would have to pay off your debts and look after their needs without financial assistance. This could lead them to depend on family relatives. But having insurance relieves them from such hardship as a death benefit would be given by the insurer in the event of your death. By choosing the one that appeals most to you based on your risk tolerance — or by mixing and matching multiple ideas — you can get on the path toward long-term financial security and build up a nest egg that you’ll be able to tap whenever you need it. You could get a free understanding by clicking here and filling this form. An investment banker can help guide you to make the correct choice in developing your personal investment strategies. On usually buys an insurance policy for family, protection, wealth creation, or retirement. Understanding your goals is very important before going for a policy. There are other factors as well like the MWP Act which you can attach to your policy that will help safeguard your family.
2. Health Insurance – Health insurance may sound similar to life insurance but this type of policy is bought to cover any costs of medical treatments and procedures. There are policies available for specific ailments but a general health insurance policy can be bought. They cover the cost of treatment, medication, and hospitalization.
3. Motor Insurance – Motor insurance covers vehicles against theft, man-made or natural calamities, damage from accidents, etc. Many policies also provide cover against damage done to your vehicle by a third party. Such motor insurance policies include two-wheelers, four-wheelers, commercial vehicles, etc.
4. Travel Insurance – In such insurances, any problems arising while traveling like loss of baggage, loss of passport, accidental death, and many more are covered. You can buy travel insurance before planning a trip to secure yourself on a domestic or international vacation.
5. Home Insurance – Home insurance covers your home from any natural or man-made calamities, theft, fire and burglary. The policy not only covers your house but also the valuables and things inside the house.
6. Fire Insurance – In this type of insurance, you are covered against damage caused to your property or valuables. Many natural calamities are also covered under fire insurance. But one should be cautious and enquire about what is not included in the policy.
While buying different types of insurance policies you should go through all the paperwork and keep updating the policy as the years go by. You should be aware of the calamities or circumstances that are excluded from the policy to avoid any kind of loss.
Know the types of Life Insurance policy to choose the right one
A life insurance policy provides financial protection to your family in the unfortunate event of your death. At a basic level, it involves paying small sums each month called premiums. At maturity of the policy, depending on the type of life insurance policy you have opted for, you will receive returns the policy may have earned over the years. Also, in the case of policyholder’s untimely demise during the tenure of the policy, your family will receive a lump sum amount.
Today, there are many variations to this basic theme, and insurance policies cater to a wide variety of needs such as:
Planning for your retirement
Saving for a specific goal in the future
Planning for your children’s education
Ensuring a flow of income, in case of the loss of your ability to earn
Types of life insurance policies
Given below are the basic types of life insurance policies. All other life insurance policies are built around these basic insurance policies by combining various other features.
1. Term Insurance Policy – A term insurance policy that is now also available as e-term insurance policy is a pure risk cover policy that protects the person insured for a specific period of time. In such type of a life insurance policy, a fixed sum of money called the sum assured is paid to the beneficiaries if the policyholder expires within the policy term. Scenario 1: If a person buys an Rs 2 lakh policy for 15 years, his family is entitled to the sum of Rs 2 lakh if he dies within that 15-year period. Scenario 2: If the policyholder survives the 15-year period, though the premiums are not paid returned, the family is offered financial security.
Income Tax exemptions: The premiums paid towards Term Insurance provides income tax exemption
100% risk cover: These insurance policies provide 100% risk cover and hence they do not have any additional charges other than the basics
Lowest premiums: Premiums paid for term life insurance policies are the lowest in the life insurance category.
2. Whole Life Policy -A whole life policy covers a policyholder against death, throughout his life. The validity of this life insurance policy is not defined and hence the individual enjoys the life cover throughout life. Under this life insurance policy, the policyholder pays regular premiums until his death, upon which the corpus is paid to the family.
Longer cover: The policy does not expire till the time any unfortunate event occurs with the individual.
Tax benefits: Premiums paid under the whole life policies are tax exempt.
Enhanced protection: Increasingly, whole life policies are being combined with other insurance products to address a variety of needs such as retirement planning, etc.
3. Endowment Policy – Endowment policies are among the popular life insurance policies as they combine risk over and financial savings. Policyholders benefit in two ways from a pure endowment insurance policy. In case of death during the tenure, the beneficiary gets the sum assured. If the individual survives the policy tenure, he gets back the premiums paid with other investment returns and benefits like bonuses..
4. Money Back Policy – This life insurance policy is preferred by many people because it gives periodic payments during the term of the policy. In other words, a portion of the sum assured is paid out at regular intervals. If the policyholder survives the term, he gets the balance sum assured.
Corpus gain: In case of death during the policy term, the beneficiary gets the full sum assured.
Choice of ULIP versions: Various life insurers are also offering new ULIP versions of money-back policies.
Tax benefits: The premiums paid and the returns accumulated through a money-back policy or its ULIP variants are tax-exempt.
5. ULIPs – ULIPs are market-linked life insurance products that provide a combination of life cover and wealth creation options. A part of the amount that people invest in a ULIP goes toward providing life cover, while the rest is invested in the equity and debt instruments for maximizing returns.
Flexibility to invest: ULIPs provide the flexibility of choosing from a variety of fund options depending on the customer’s risk appetite one can opt for:
Aggressive funds: Invested largely in the equity market with the objective of high capital appreciation
Conservative funds: Invested in debt markets, cash, bank deposits and other instruments, with the aim of preserving capital while providing steady returns
Long term planning: ULIPs can be useful for achieving various long-term financial goals such as planning for retirement, child’s education, marriage, etc.
6. Annuities and Pension – In these types of life insurance policies, the insurer agrees to pay the insured a stipulated sum of money periodically. The purpose of an annuity is to protect against financial risks as well as provide money in the form of pension at regular intervals.
Thus, whatever your financial requirements, there is a wide variety of insurance policies to ensure that your requirement is fulfilled as per your needs and planning.