Losing a loved one is a traumatic experience for the family. However, the life becomes even more difficult for the surviving members if the sole earning member of the family or one of the earning members of the family dies and the family is left without sufficient money to meet basic living needs and to prepare for future goals. Needless to say, while the needs will stay, the family will be compelled to compromise both in terms of quality of life as well as abandoning some of the goals.

To ensure that none of this happens, one must be adequately insured. Life insurance has to viewed as a necessity and not as a burden.

Term Insurance policy
A term insurance policy is a pure risk cover for a specific period of time. In other words, the sum assured is payable only if the policy holder dies within the policy term. For example, if someone buys a policy for Rs.10 lacs for 20 years, his family will be entitled to receive this money is he dies during these 20 years. However, if he survives this 20 years period, no amount is payable to the policy holder. Simply put, there is no element of investment in this policy.

Whole life policy
Under this policy, the policy holder gets an insurance cover against death, irrespective of when it happens. Therefore, the policy holder pays regular premium until his death, following which the money is paid to the beneficiary. This too is a 100 percent risk cover policy and does not take care of one’s financial needs during the life time.

Endowment Policy
These policies combine the risk cover with financial savings and are easily among the most popular insurance policies. In an endowment policy, the sum assured is payable even if the insured survives the policy term. If the insured dies during the tenure of the policy, the insurance company pays the sum assured as in a pure risk cover insurance policy. A pure endowment policy is also an investment tool whereby the insured gets back the sum assured if he survives the tenure of the policy.

Money back policy
These policies are structured to provide sums required over a stipulated period of time to meets various short to medium term objectives such as marriage, education etc. The remainder of the sum is payable at the end of the policy term. However, in case of death, the full sum assured is payable to the beneficiary. The premium is payable for a specific period of time.

Unit Linked Insurance Plan
Unit linked insurance plans (ULIPs) are aimed at providing the benefits of risk cover and flexibility in investment. The policy value at any given point in time varies according to the value of the underlying assets at the time. Under a ULIP, the premium amount, after deducting the charges and premium for risk cover, is invested in the asset class or a combination of asset classes as chosen by the policy holder. Needless to say, the investment risk is borne by the policy holder.

In a ULIP, there is an option of either paying a single premium or on an annual, high-yearly, quarterly or monthly basis. ULIP investors also have the flexibility of switching across various plans/asset classes for a few times in a year without paying any charges.

Annuities and Pension Plans
The objective of an annuity plan is to protect against risk as well as provide money in the form of pension at regular intervals. Under an annuity plan, the insurer agrees to pay the insured a stipulated sum periodically. These policies are aimed at meeting specific needs to cross-section of investors.