What Are Traditional Life Plans?
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Traditional Life Insurance, also known as whole life insurance, money back or endowment insurance, provides multiple benefits like risk cover, fixed income returns, safety and tax benefits. These are considered risk-free on account of their fixed returns in case of death or maturity of the term.
This type of life insurance policies provides insurance coverage to the policy holder for his/her entire life. Unlike a term life insurance policy, this type of plan never runs out. In case of an inevitable death of the policy holder, the insurance pay-out is made to the policy's beneficiaries.
- Whole Life Insurance - A life insurance policy that is guaranteed to remain in force for the insured's entire lifetime.
- Money-Back Policies - Provides life coverage during the term of the policy, and the maturity benefits are paid in installments.
- Endowment Plans - Endowment Plans are a combination of insurance and investment. The insured will get a lump-sum along with bonuses on policy maturity or on death.
Who Should Consider Choosing A Traditional Insurance Plan?
An individual should opt for a traditional life insurance policy under the following circumstances:
- Looking for a long term financial stability
- Looking for risk coverage and guaranteed returns on your premiums
- Continuous cash flow for predictable future life events like child's education & marriage or your own retirement.
- Looking for higher tax saving instruments
Benefits of Traditional Life Insurance Plans
- As a traditional insurance policy works on the 90/10 rule in the industry, the insurance company can retain only 1/10 of the profits. The rest of it would be shared with the customers
- You get higher returns on investments
- It makes for a risk-free option, as the investment risk is entirely borne by the insurance company
- Traditional Insurance is closer to protection than ULIPs
- Traditional Insurance Plans offer built-in guaranteed benefits, leaving behind the chances of mis-selling
Conclusion
Traditional life insurance provides coverage for your entire life, with a guaranteed amount for your survivors, at a premium that remains the same. You also build up "cash value" with such a policy, an amount you can borrow against if you need money for some emergency.
Also read: The Role Of Term Insurance Plan In Our Life
Factors to Consider While Choosing The Best Term Insurance Plan
