What is a Protection Plan?
Protection plans provide the benefit of insurance against any kind of loss or mishap. Worldwide there are protection plans for all kinds of products, property and other instruments. There are also income protection plans and plans to guard against credit and debit card theft available in the market. Protection plans in India mainly focus on cover against life incidents. The plans available cover a huge variety of situations for individuals, family members, groups and children. Protection plans are an essential way to provide for the future of your family and dependents in the case of your demise.
What are the benefits of buying a Protection Plan?
Life is uncertain and there may be a tragedy around any corner. With a Protection Plan in place you can be rest assured of your family’s financial future in case of any mishap. The policies that you opt for aim to provide a sizeable death benefit and various other benefits to all the dependents identified in your policy. There are several policies, such as Term Plans which do not need a huge investment on premiums to get an adequate coverage. ULIP’s offer the dual benefit having an investment component along with the insurance component. Several other plans offer a different variety of benefits.
What are the different types of Protection Plans?
There are several different types of Protection Plans available in the market. The plans are classified based on the kind of person or persons that the policy covers. Here are the most common types:
1. Term Protection Plans:
Individual Life Protection Plans are the most common insurance instrument used in India today. These plans offer to pay your family and dependents a pre-agreed sum in the unfortunate case of your demise. Term plans are preferred as they have low premium amounts and have a substantial death benefit associated with them. With the Term Return of Premium option, the policyholder gets the additional benefit of getting back the premium amount in case he outlives the policy term.
2. Money Back Plans:
Money back plans offer money back to the policyholder at regular intervals of time. These plans are a good protection option in that they provide regular cash infusions throughout the policy term which can be used for investment. Further, they also offer a death benefit to beneficiaries in case the policyholder expires during the policy term.
3. Unit Linked Plans:
These plans have an investment component linked in to the insurance plan. The policyholder has the option to invest in different equity or debt instruments based on their risk appetite. These plans have become refined in the past few years and are now competitive investment opportunities for long term flexible investments. They also provide a death benefit under the insurance umbrella of the policy.
4. Pension Plans:
Retirement or pension plans are a great way to protect for your future once your working life is completed. These plans offer several tax breaks and many maturity benefits to the policyholder when the policy term comes to an end. Retirement plans offer a steady stream of income from the maturity benefit or a one time lump sum payment to the beneficiary. These plans are a key way to make oneself financially independent in the retirement years. A pension plan is something we all should look to invest in early in life.
5. Joint Life Plans:
These plans are specifically tailored for family members, especially spouses. The policy type can be a ULIP or a Term plan, or any other type of policy. The terms of a Joint Life plan are such that it ensures that your partner will remain financially independent even in the unfortunate circumstance of your demise.
6. Child Protection Plans:
Child Plans ensure that the future of your children is secure. Parents opt for Child Plans in order to create financial security for their children’s education, marriage or any other milestone in the child’s life. A major benefit of these Plans is that if the parent expires during the term of the plan, the insurance company takes over the future premium payments. A death benefit is also paid out to child.
How to choose a Protection Plan?
There are several factors to consider while buying a protection plan.
1. Premium amount:
The most important thing to consider the premium that a particular insurer or policy offers. This should be sufficient in terms of the cover that you get from the policy. Choose a policy that doesn’t burn a hole in your pocket while giving you adequate coverage as per your needs.
2. Number of dependents:
This is what you should consider when deciding the right cover amount from a policy. Take into account the number of dependents who will be affected in case you are not around as a breadwinner and also decide how much cover would be needed for each dependent.
3. Lifestyle and expenses:
This is a consideration which should include inflationary costs as well. The cover amount which looks large today may become quite small in just a few years time. If your policy has to sustain a few dependents after you, then the lifestyle that the amount will have to support becomes very important consideration.
Take into consideration the current outstanding liabilities you have that will pass on to your dependents. These could be loan payments on your home or other possessions. The policy cover amount should be large enough to cover some part of your liabilities while also supporting your dependents.
When is the right time to buy a Protection Plan?
Protection plans are best bought early on in life. All these policies carry long term benefits and are meant to be planned out early. Policies such as Child plans are tailored to provide milestone benefits to the child and Retirement plans can offer a large corpus of sum insured the earlier on the policy is initiated. Even a basic Term plan is a long term investment into your future. Buying certain specific protection plans such as Child Plans or Joint Protection plans is an activity best done when you start a family. However, an individual Term plan, retirement plan or ULIP should be bought keeping your financial future in mind.
For a genuine and transparent advice on your Protection Insurance Plan, call our advisors on 9948 661 204 and get a Free Consultation for the first time. Alternatively, submit our enquiry form and one of our Financial Advisors will get back to you at your convenience.
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