Which Life Insurance Policy Should You Buy?

While term insurance is a must-buy to build a protective cushion for your family and dependants, you may consider buying traditional plans or Ulips depending on your risk appetite and needs, provided you are ready to pay the costs

- By Meghna Maiti

Life insurance is an essential part of one's financial plan; and like any other product, there are several options one can choose from. There is no one-size-fits-all option, and what may be right for one may not be so for others. So, it's important to understand the three broad forms of life insurance—term plan, traditional and endowment plans, and unit-linked insurance plans (Ulips)—and how they are different from each other.

Term Plans: The Purest Form Of Life Insurance

This is the purest form of life cover as it insures only the risk to life.

Says Karthik Chakrapani, chief business officer (CBO), Pramerica Life Insurance: “Term insurance is considered the bedrock of financial protection because it provides a pure, unadulterated safety net for your loved ones. It replaces the current and future possible income of the breadwinner in the event of an untimely demise, ensuring that the family's financial goals like education, housing, expenses, and long-term security remain uncompromised.”

So, it's important that a term plan is adequate to cover these expenses in your absence. “The basic hygiene would be to choose a cover that is 10-15 times your annual income, considering current liabilities, future costs such as education, and inflation,” says Rajeev Chugh, chief financial officer (CFO), Future Generali India Life Insurance.

Traditional Plans: For The Conservative Policyholder

Traditional life insurance plans, such as endowment and guaranteed return plans, offer a mix of life cover and assured savings. They guarantee a fixed maturity amount—either as a lump sum or in staggered payouts.

Says Vivek Jain, CBO, life insurance at Policybazaar, an insurance aggregator: “These plans are best suited for the risk-averse who want capital protection, or have specific life goals, like funding a child’s education, or who prefer a forced savings mechanism for disciplined investing.”