Insurance policies

There are various options available :

Term plan : A term plan is pure risk cover. This essentially allows you to insure with lesser premium for a larger sum assured. But this does not offer any returns if you survive the tenure (However, there are some policies, which return the premium amount paid). The idea of this policy is purely to ensure that the beneficiaries(usually the family) aren’t left desperate in financial terms and future prospects in case of unfortunate incidents. Term insurance is undoubtedly, the cheapest insurance cover, mainly because this only includes administration expenses and mortality charges. In fact, this is not savings.

Endowment policy : An endowment policy involves a life cover for a certain term of years during which a regular (annual) premium is to be paid. At the end of the term the accumulated premiums plus a certain return will be paid back. In case of premature death, before the term ends, the beneficiary will be paid the sum assured value of the cover.

Money back policy : Money policy is an endowment policy but with periodic returns. These returns are a certain percentage of the sum assured. Between money-back and endowment, money-back is always more expensive, as these policies charge higher premium, plus there are various charges levied when the periodical returns are given.

Unit Linked Insurance Plans (ULIP) : This is equity based insurance investment. This is for those who are looking at higher returns on investments along with a life cover. When investing in ULIP – unless the market is consistently doing well, the returns may not be good within short term. But within a period of 10 or 15 yrs, the returns will be high.