#difference between Sum insured vs sum assured

[davidjohn4252]

Sum insured vs sum assured

Sum insured is the coverage for damage whereas Sum assured is a pre-defined sum payable to nominee. Learn the difference between sum insured vs sum assured at SBI Life.

[financialeducationsip]

FD vs Life Insurance: Which One Should You Choose?

Financial planning is all about making the right decisions to ensure your future security. With so many options available, two common financial products that people often consider are Fixed Deposits (FD) and Life Insurance. While both are valuable tools for managing your finances, they serve very different purposes. To make an informed decision, it’s crucial to understand the nuances of both FD and life insurance. Let's dive into the details to see which one suits your needs.

What is a Fixed Deposit (FD)?

A Fixed Deposit, often called an FD, is a financial instrument provided by banks and non-banking financial companies (NBFCs). In simple terms, it's an investment where you deposit a lump sum of money for a fixed tenure at a predetermined interest rate. The money grows over time as interest accumulates, and at the end of the tenure, you get back your principal amount along with the interest.

How does an FD work?When you open an FD account, you agree to leave your money with the bank for a specific period, say one to five years, and in return, the bank pays you interest. The longer the tenure, generally the higher the interest rate.

Types of Fixed Deposits:

Standard FD – Fixed tenure and interest rate.

Tax-Saving FD – Locked-in for five years with tax benefits under Section 80C.

Flexi FD – Linked to a savings account for added flexibility.

What is Life Insurance?

Life insurance is a contract between you and the insurance company. In exchange for regular premium payments, the insurer promises to pay a sum of money to your beneficiaries upon your death. It’s a financial safety net for your loved ones, ensuring they are financially secure in case anything happens to you.

How does life insurance work?You select a life insurance policy based on your financial needs and pay premiums either annually, quarterly, or monthly. If you pass away during the policy term, the insurer pays out the sum assured to your beneficiaries.

Types of Life Insurance:

Term Insurance – Pure protection plan; no payout if you survive the term.

Whole Life Insurance – Coverage for your entire life.

Endowment Plan – Insurance plus savings; gives a payout even if you survive the policy term.

ULIPs – Combines insurance with market-linked investment options.

Key Features of Fixed Deposits

Guaranteed Returns:FDs offer a fixed interest rate throughout the tenure, ensuring guaranteed returns. There's no market risk involved, making FDs a low-risk investment.

Interest Rates:The interest rates on FDs vary based on the bank and tenure, generally ranging from 4% to 7%. Senior citizens often get an additional interest rate benefit.

Tenure Options:You can choose the tenure for your FD, ranging from a few months to several years, depending on your financial goals.

Key Features of Life Insurance

Financial Protection:Life insurance provides your family with financial protection in the unfortunate event of your death. It ensures they have enough money to cover expenses like debts, education, and daily living.

Premium Payments:Life insurance policies require regular premium payments, which can be paid monthly, quarterly, or annually. The premium depends on factors like age, health, and the sum assured.

Maturity Benefits:Some life insurance policies, like endowment plans and ULIPs, offer maturity benefits if you outlive the policy term.

FD vs Life Insurance: The Fundamental Differences

Risk Factor:FDs come with almost no risk, making them a safe investment option. Life insurance, however, has a variable component, especially if you opt for plans like ULIPs that are tied to market performance.

Investment Objective:FDs are purely investment vehicles designed to grow your money with guaranteed returns. Life insurance, on the other hand, serves a dual purpose: providing financial protection and, in some cases, offering savings or investment growth.

Liquidity:FDs offer better liquidity, allowing you to withdraw your money prematurely, albeit with a penalty. Life insurance policies, especially term plans, do not have any cash value until maturity or death.

Returns: FD vs Life Insurance

FD Returns:The returns on FDs are fixed and known from the start, depending on the financial institution and tenure.

Life Insurance Returns:For term insurance, there are no returns unless the insured event occurs. Endowment plans and ULIPs, however, offer maturity benefits and market-linked returns, which can vary significantly based on the policy.

Tax Implications of FD and Life Insurance

Taxation on FD Interest:The interest earned from an FD is taxable. 

Tax Benefits of Life Insurance:Premiums paid towards life insurance qualify for deductions under Section 80C of the Income Tax Act, up to ₹1.5 lakh annually. Also, the death benefit and maturity amount are generally tax-exempt under Section 10(10D).

FD vs Life Insurance for Risk-Averse Investors

FDs are ideal for conservative investors seeking guaranteed returns and low risk. Life insurance, particularly term plans, appeals to risk-averse individuals who want financial security for their dependents.

When to Choose Fixed Deposits?

If you're looking for a low-risk investment with guaranteed returns, an FD is the way to go. It's perfect for short- to medium-term financial goals like saving for a vacation or home renovation.

When to Choose Life Insurance?

If your primary concern is ensuring your family’s financial well-being in your absence, life insurance is crucial. Opt for life insurance if you have dependents who rely on your income.

FD vs Life Insurance for Long-Term Financial Goals

While FD helps in wealth accumulation for short- and medium-term goals, life insurance plays a more significant role in long-term financial security, especially for your family.

Liquidity and Withdrawal Flexibility

Premature Withdrawal from FD:You can withdraw money from an FD before maturity, but it usually comes with a penalty.

Liquidity in Life Insurance:Life insurance generally lacks liquidity, especially term policies. For policies like ULIPs, partial withdrawals are allowed after a certain period.

Combining FD and Life Insurance in Financial Planning

Both FD and life insurance can be valuable parts of your financial portfolio. While FD provides short-term financial stability, life insurance secures your family’s future.

Conclusion

Both FD and life insurance have their own sets of advantages. FDs are ideal for risk-averse investors seeking guaranteed returns, while life insurance provides financial protection for your loved ones. For a well-rounded financial plan, consider using both.

FAQs

Can you lose money in an FD?No, FDs provide guaranteed returns, making them a safe investment.

Is life insurance necessary if you have other investments?Yes, life insurance offers financial protection that other investments don’t.

Which one provides better tax benefits: FD or Life Insurance?Life insurance provides better

[amanktreks]

FD vs Life Insurance: Understanding the Differences and Making the Right Choice

When it comes to financial planning, two commonly debated options are Fixed Deposits (FD) and Life Insurance. While both serve distinct purposes, investors often find themselves comparing these two due to their long-term financial benefits. However, they cater to very different financial goals. This blog dives deeper into the differences between FD and Life Insurance, helping you understand how to utilize each effectively.

What is a Fixed Deposit (FD)?

Fixed Deposits (FDs) are savings instruments offered by banks and financial institutions that provide guaranteed returns over a fixed period. The investor deposits a lump sum amount with the bank, which earns interest at a predetermined rate for the tenure chosen by the investor.

Features of FD:

Guaranteed Returns: One of the most attractive features of FDs is the assurance of returns. The interest rate is fixed at the time of investment and remains unaffected by market fluctuations.

Safety: FDs are considered one of the safest investment options, especially for risk-averse individuals. They offer capital protection along with steady returns.

Flexible Tenure: Investors can choose the tenure of their FD, ranging from a few months to several years, depending on their financial goals.

Liquidity: Though FDs are fixed for a tenure, they do offer premature withdrawal options, often with a penalty. This provides a certain level of liquidity to the investor.

Benefits of FD:

Low Risk: FDs are perfect for individuals who prefer low-risk investments with guaranteed returns.

Predictability: Since the interest rate is locked in, investors can predict their returns, making it easier to plan for financial goals.

Tax Benefits: FDs with a tenure of five years or more qualify for tax deductions under Section 80C of the Income Tax Act. However, the interest earned is taxable.

What is Life Insurance?

Life Insurance is primarily designed to provide financial protection to your dependents in case of your untimely demise. It is a contract between you and an insurance provider, where the insurer guarantees a sum of money to your beneficiaries upon your death, in exchange for regular premium payments.

Types of Life Insurance:

Term Insurance: This is the most basic form of life insurance. It offers death benefits to the beneficiaries if the policyholder passes away during the policy term. Term insurance is affordable and provides high coverage.

Endowment Policy: This type of life insurance combines insurance coverage with a savings component. It offers both death benefits and maturity benefits if the policyholder survives the policy term.

Unit-Linked Insurance Plans (ULIPs): ULIPs offer insurance along with investment opportunities. A part of your premium is used for insurance, while the remaining portion is invested in equity or debt funds.

Benefits of Life Insurance:

Financial Protection: The primary purpose of life insurance is to provide financial security to your family in case of your death. This can help cover daily expenses, pay off debts, and secure your family’s future.

Long-Term Savings: Life insurance plans like endowment policies and ULIPs provide savings along with protection, helping you build wealth over time.

Tax Benefits: Life insurance premiums are eligible for tax deductions under Section 80C, and the death benefit is typically tax-free under Section 10(10D) of the Income Tax Act.

FD vs Life Insurance: Key Differences

While both FDs and life insurance are important tools in financial planning, they cater to different needs.

Objective:

FD: The main objective of an FD is to earn safe, stable returns on your savings.

Life Insurance: The objective of life insurance is to provide financial protection to your dependents in the event of your death.

Risk Factor:

FD: FDs are virtually risk-free. Your principal is secure, and you know exactly what returns you’ll earn.

Life Insurance: Life insurance, especially term plans, carries no investment risk. However, policies like ULIPs involve market risk as part of the premium is invested in market-linked instruments.

Returns:

FD: The returns from an FD are fixed and predictable, typically ranging from 5-7% per annum. However, they are taxed as per your income slab.

Life Insurance: Term life insurance doesn’t offer returns unless the policyholder dies during the term. ULIPs and endowment policies provide returns, but they are generally lower than equity-based investments.

Liquidity:

FD: FDs provide some liquidity, as you can withdraw your money before the maturity period, though a penalty may apply.

Life Insurance: Life insurance policies, especially traditional ones, lack liquidity. Most policies have a lock-in period during which you cannot withdraw funds.

Taxation:

FD: The interest earned on FDs is taxable, making them less tax-efficient.

Life Insurance: Life insurance premiums qualify for tax deductions under Section 80C, and the death benefit is tax-free, making it a more tax-efficient option.

When to Choose FD:

FDs are ideal if your goal is short-term savings and earning a fixed, safe return. They work best for risk-averse individuals who want to avoid market volatility. FDs are particularly useful for building an emergency fund or saving for specific short-term financial goals like a vacation or home renovation.

When to Choose Life Insurance:

Life insurance is essential if you have dependents who rely on your income. It is primarily for providing financial security to your loved ones in your absence. Term insurance, in particular, is a must-have for anyone with financial dependents. Life insurance is also useful for long-term savings, particularly if you opt for ULIPs or endowment plans that combine protection with wealth accumulation.

Conclusion

FDs and Life Insurance serve different financial objectives, and your choice should depend on your individual needs. If you’re looking for guaranteed returns with no risk, FDs are the way to go. However, if your primary goal is to secure your family’s financial future, life insurance should be a priority. Both can coexist in a well-rounded financial plan, ensuring both growth and protection.

[ritikjadhav]

Sum Insured vs Sum Assured

Sum insured is the coverage for damage whereas Sum assured is a pre-defined sum payable to nominee. Learn the difference between sum insured and sum assured at SBI Life.

[akash113]

Car insurance terminologies can often seem like a web, especially when it comes to distinguishing between the terms "Sum Insured" and "Sum Assured." Understanding these concepts is important for making the right choice about car insurance coverage. Kotak General  Insurance into the complexities of these terms to explain their importance in the world of online car  insurance.

Sum insured: Defining coverage limits

The Sum insured refers to the maximum amount an insurer agrees to pay in case of damage, theft or total loss of the insured vehicle under car insurance. It represents the market value or the agreed-upon value of the car at the time of policy issuance. This figure determines the coverage limits for the car, providing financial safety up to the specified amount.

Factors such as the car's make, model, age, depreciation and additional accessories can impact the sum insured. Often, different options are offered for policyholders to select their preferred coverage amount of the new car  insurance, considering the potential risks and replacement costs.

Sum assured: Assuring the policy benefits

Contrarily, sum assured is a term commonly associated with life  insurance and other types of policies such as health or endowment plans. It signifies the guaranteed amount payable to the policyholder or beneficiaries under specific circumstances like death, illness or maturity of the policy.

In the context of car insurance, the term "Sum Assured" is not typically used. Instead, Sum insured remains the primary indicator of the coverage size in the event of car-related incidents.

Understanding the importance: Sum insured in car insurance

The sum insured in car  insurance plays a vital role in determining the compensation amount in case of unforeseen events. Opting for an adequate sum insured is crucial to ensure comprehensive coverage that sufficiently addresses potential damages or losses to the insured car while renewing car  insurance. It acts as a financial protection, reducing the financial burden on the policyholder in times of distress.

Determining the right sum insured involves considering multiple aspects such as the car's current market value, depreciation, additional features and potential repair costs. Policyholders should periodically review and adjust the sum insured to align with the car's value and changing market dynamics.

[kristenmar985]

Sum Insured vs Sum Assured: Key Differences Explained

Understand the crucial differences between sum insured and sum assured in insurance. Learn how each impacts your policy and benefits. Explore now for informed decisions!

[financebloging]

Life Insurance vs Health Insurance: Key Differences for Informed Choices

Planning for the future is a cornerstone of responsible living, and if you're a forward-thinker, considering Life and Health Insurance policies should be your next strategic move. Let's embark on a journey to comprehend the nuances of these policies, exploring the key differences that set Life Insurance and Health Insurance apart. Understanding the Contrast of Life Insurance vs Health Insurance Life insurance and health insurance serve disparate purposes, acting as financial safeguards in distinct scenarios. Here's a detailed breakdown of the differences: FeaturesLife InsuranceHealth InsuranceCoverage TypeComprehensive, lifelong coverage, pays at policyholder's deathPrimarily covers medical expenses, health needsPremiumsFixed and flexible premiums, investment plans availableOnly fixed premiums, no investment, prioritizes medical needsDurationLong-term plan with fixed tenureShort-term plan, typically renewed annuallyTerminationUsually ends with policy expirationRenewed annually to ensure continuous health coverageBenefitsProvides financial protection to family upon policyholder's demiseCovers medical expenses and hospitalization during the policy termSurvival BenefitsOffers both survival and death benefits at the end of the insurance termNo survival benefits, focuses on addressing medical needs Unveiling Life Insurance Life insurance is essentially a contractual agreement between a policyholder and an insurance company, promising to provide the insured amount to the bereaved family after the policyholder's demise. This coverage serves as a pillar of financial stability for the entire family and supports future plans or investments. Types of Life Insurance - Whole Life Insurance: Featuring fixed premium payouts and tax-free, fixed sum assured, it is a cost-effective option with a lower risk profile. - Universal Life Insurance: Blending investment and death benefits, this option offers flexible premiums and higher returns, albeit with increased risk. Advantages and Disadvantages of Life Insurance Pros - Cost-Effective: Less expensive than permanent policies. Affordable Large Death Benefit: Provides substantial coverage at a reasonable cost. Online Accessibility: Easy quotes and application process available online. Convertible Policies: Some can convert to permanent policies without new medical exams. Health-Based Premiums: Future premiums based on current health for convertible policies. - Temporary Coverage: Ends once the term expires. Cost Increase at Renewal: Buying a new policy at term end can be expensive. Limited Options After Term: Difficulty securing new coverage if health declines. No Cash Value: Lacks a cash value accessible during the policyholder's lifetime. Decoding Health Insurance Health insurance steps into action when health issues arise, requiring medical attention and hospitalization. Policyholders pay fixed premiums for health protection, and the coverage varies based on the chosen health insurance plan. Types of Health Insurance - Individual Health Insurance: Tailored for individual needs, covering medical expenses, illnesses, accidents, and emergencies. - Family Floater Health Insurance: An umbrella coverage for all household members under one premium, addressing various medical expenses. - Senior Citizens Health Insurance: Customized for those aged 60 and above, accounting for specific needs like domiciliary care and critical illnesses. Advantages and Disadvantages of Health Insurance Pros - Financial Security in Critical Illness Cashless Hospitalization Network Hospitals for Cashless Services No Claim Bonus for Increased Sum Insured Add-ons or Riders for Customization Financial Protection in Case of Death or Disability Peace of Mind and Focus on Quality Healthcare Affordable Healthcare with Comprehensive Coverage - High Costs, Especially for the Self-Employed Pre-Existing Conditions Have Waiting Periods Waiting Periods for Certain Benefits Age-Dependent Increase in Premiums Co-Pay Requirements for Insured Customers Complexity in Comparing Coverage and Premiums Life Insurance vs. Health Insurance The decision to invest in life or health insurance hinges on individual needs. While life insurance ensures family financial security in the event of the policyholder's death, health insurance addresses medical expenses during the policyholder's lifetime. Key Distinctions - Why Invest? - Life Insurance: Ensures family financial security in case of sudden death. - Health Insurance: Shields against rising medical expenses, eliminating out-of-pocket costs. - Core Benefit: - Life Insurance: Pays the promised sum to the beneficiary. - Health Insurance: Covers treatment expenses, subject to conditions. - Additional Benefits: - Life Insurance: Various add-ons like maturity benefits, surrender benefits, and loyalty additions. - Health Insurance: Some policies provide free health check-ups, and no claim bonuses may apply. - Types of Covers: - Life Insurance: Individual and group covers, with plans like term, savings, child-related, and retirement. - Health Insurance: Individual, family, and group coverage, including comprehensive plans and critical illness cover. - Tax Benefits: - Life Insurance: Under Section 80C and Section 10(10D) of the Income Tax Act. - Health Insurance: Under Section 80D of the Income Tax Act. In your financial portfolio, Life Insurance and Health Insurance play distinct roles. Making an informed decision based on your unique requirements will unlock the full potential of each. The Benefits Unveiled Benefits of Life Insurance Plans - Financial security and protection. - Tax-free payouts. - Guaranteed death benefit. - Tax benefits as per prevailing tax laws. Both Life Insurance and Health Insurance are indispensable for those concerned about the future, family, and well-being. Health insurance safeguards your medical affairs, while life insurance ensures your family's security in your absence. In the uncertain journey of life, it's prudent to protect yourself and your loved ones before it's too late. Both these insurance policies are crucial, and the choice between them is now a personal one. Consider your needs, weigh the options, and secure a better future for yourself and your family. Read the full article

[sagarnarang-blog1]

Family Floater vs. Individual Health Insurance Making the Best Choice for Your Loved Ones

Health insurance is an indispensable aspect of financial planning, providing a safety net against the rising costs of medical care. When it comes to securing the health of your loved ones, the choice between a family floater and individual health insurance is a crucial decision. 

Each type of policy has its own merits and considerations, and understanding the differences can help you make an informed choice tailored to your family's unique needs.

Family Floater Health Insurance

Family floater health insurance is a comprehensive policy designed to cover the entire family under a single umbrella. This type of policy allows you to insure not just yourself but also your spouse, children, and in some cases, even dependent parents. The sum assured is shared among all family members, providing flexibility in managing healthcare expenses.

Advantages of Family Floater Health Insurance

Cost-Effective

One of the primary advantages of a family floater plan is cost-effectiveness. Premiums for family floater policies are generally lower than the combined premiums of individual policies for each family member.

Single Policy, Multiple Benefits

Managing a single policy for the entire family simplifies administrative tasks. From premium payments to policy renewals, dealing with a single policy streamlines the process.

Flexibility in Coverage

Family floater plans offer flexibility in terms of coverage. As family members grow or change, you can easily add or remove individuals from the policy.

Individual Health Insurance

Individual health insurance, on the other hand, provides coverage for a single person. Each family member requires a separate policy, and the sum assured is dedicated solely to that individual. This type of policy is tailored to meet the specific healthcare needs of each person.

Advantages of Individual Health Insurance

Tailored Coverage

Individual health insurance allows for personalized coverage. You can choose a policy that addresses the specific health concerns and requirements of each family member.

Independence of Coverage

Each family member has an independent policy, which means their coverage is not affected by the health conditions or claims of other family members.

Portability

Individual health insurance provides portability, allowing family members to retain their coverage even if they move or if there are changes in family structure.

Making the Best Choice

Assess Family Dynamics

Consider the size and dynamics of your family. If you have a nuclear family with relatively similar health profiles, a family floater plan might be more cost-effective. On the other hand, if family members have distinct health needs, individual policies may be more suitable.

Evaluate Premiums and Coverage

Compare the premiums of family floater and individual policies, taking into account the coverage offered. Consider factors such as pre-existing conditions, maternity benefits, and other specific needs.

Future Planning

Anticipate changes in your family structure and health needs. If you expect additions to the family or have elderly dependents, choose a plan that allows flexibility in coverage.

Review Policy Terms

Carefully review the terms and conditions of each policy, including waiting periods, exclusions, and the network of hospitals covered. Understanding these details is crucial to avoiding surprises during a medical emergency.

Conclusion

Selecting between family floater and individual health insurance involves a careful consideration of your family's health needs, budget constraints, and future expectations. There is no one-size-fits-all solution, and the right choice depends on your unique circumstances. 

By weighing the advantages and disadvantages of each option, you can make an informed decision that ensures the well-being of your loved ones. Remember, investing time in understanding your insurance options today can pave the way for a healthier and financially secure future for your family.

[ibilike]

Annuity Plans vs. Assured Income Plans: Understanding the Difference

When it comes to securing your financial future and ensuring a steady stream of income, annuity plans and assured income plans are two popular options. Both serve the purpose of providing financial stability, but they differ in how they work and what they offer.

What are Annuity Plans?

Annuity plans are financial products designed to provide you with regular, periodic payments in exchange for a lump sum or periodic premium payments. They are typically used as a means of generating retirement income. Annuities come in various forms, such as immediate annuities that start payments right away, and deferred annuities that delay payments until a future date. Annuity plans can be fixed, offering a predetermined payout, or variable, where the payout depends on the performance of underlying investments.

What are Assured Income Plans?

Assured income plans are insurance policies that promise a regular income for a specified period or until a certain age, offering financial protection to you and your loved ones. These plans are structured to provide a guaranteed income, and they are often used as a form of life insurance with added income benefits. If the policyholder survives the policy term, they receive a lump sum or regular payments, ensuring financial security.

Difference Between Annuity Plans and Assured Income Plans

Here are the key differences between annuity plans and assured income plans presented in bullet points:

Nature of the Plans:

Annuity Plans: Annuity plans are financial contracts, typically offered by financial institutions, designed to provide regular payments in exchange for a lump sum or periodic premium payments.

Assured Income Plans: Assured income plans are insurance policies that offer a guaranteed income for a specified period or until a certain age. They function as insurance policies with added income benefits.

Income Stream:

Annuity Plans: Annuity plans provide periodic payments, and they can be immediate or deferred. The income generated may be fixed or variable, depending on the plan type.

Assured Income Plans: Assured income plans promise a regular income, and the payments are typically guaranteed. These plans are designed to provide financial security, and they often include a lump sum payout or regular income.

Purpose:

Annuity Plans: Annuity plans are commonly used for generating retirement income, managing savings, or converting a lump sum into a periodic payment stream.

Assured Income Plans: Assured income plans serve as a form of life insurance with added income benefits. They provide financial protection and a guaranteed income, especially if the policyholder survives the policy term.

Providers:

Annuity Plans: Annuity plans are usually offered by financial institutions, including banks, insurance companies, and investment firms.

Assured Income Plans: Assured income plans are typically provided by insurance companies and are structured as insurance policies.

Payout Flexibility:

Annuity Plans: Annuities offer flexibility in choosing immediate or deferred payouts and can have variable returns based on underlying investments.

Assured Income Plans: Assured income plans offer guaranteed and structured payouts, often including lump-sum payouts upon policy maturity.

Use Cases:

Annuity Plans: Annuities are suitable for individuals looking to secure retirement income, manage their savings, or convert a lump sum into regular payments.

Assured Income Plans: Assured income plans are ideal for those seeking financial protection with guaranteed income, especially to secure their family's financial future.

Understanding these differences will help you determine which plan aligns better with your financial goals and needs, whether it's planning for retirement or ensuring financial security.

Conclusion

The choice between annuity plans and assured income plans depends on your specific financial goals and preferences, whether it's optimizing retirement income or providing financial security.

[rwealth01]

Term insurance vs ULIP – Top 12 Major Differences

Term insurance and ULIP (Unit-Linked Insurance Plan) are two of the most popular types of life insurance policies in India. While both provide financial security to policyholders, there are several key differences between the two. In this article, we will discuss the top 12 major differences between term insurance and ULIP.

Premiums

The premium for term insurance is generally lower than that for ULIP. This is because term insurance provides only pure life coverage, whereas ULIP offers a combination of life coverage and investment benefits.

Coverage

Term insurance provides only life coverage, whereas ULIP provides both life coverage and investment benefits. The investment component of ULIP allows policyholders to invest in equity or debt funds, depending on their risk appetite.

Maturity Benefit

Term insurance does not provide any maturity benefit to the policyholder. On the other hand, ULIP provides maturity benefits, which are calculated based on the performance of the underlying funds.

Flexibility

Term insurance offers little flexibility in terms of policy features and benefits. ULIP, on the other hand, offers a wide range of investment options, riders, and other policy features that can be customized to suit the policyholder's needs.

Investment Options

Term insurance does not offer any investment options. ULIP, on the other hand, offers a variety of investment options, including equity funds, debt funds, and balanced funds.

Returns

The returns on term insurance are limited to the sum assured in case of the policyholder's death. ULIP offers potentially higher returns, depending on the performance of the underlying funds.

Risk

Term insurance carries very little investment risk, as it provides only life coverage. ULIP carries investment risk, as the policyholder's returns are linked to the performance of the underlying funds.

Premium Payment

Term insurance premiums are paid for the duration of the policy term. ULIP premiums can be paid for a limited period or throughout the policy term, depending on the policyholder's preference.

Tax Benefits

Both term insurance and ULIP provide tax benefits under section 80C of the Income Tax Act. However, the tax benefits for ULIP are subject to certain conditions.

Surrender Value

Term insurance does not provide any surrender value. ULIP provides a surrender value, which is calculated based on the performance of the underlying funds.

Charges

Term insurance carries very few charges, such as mortality charges and administrative charges. ULIP carries several charges, including mortality charges, administrative charges, fund management charges, and surrender charges.

Transparency

Term insurance is generally considered to be more transparent than ULIP, as the policy features and benefits are straightforward and easy to understand. ULIP, on the other hand, can be more complex, as it offers a range of investment options and policy features that require careful consideration.

In conclusion, both term insurance and ULIP provide financial security to policyholders. However, term insurance is a pure life coverage policy, whereas ULIP provides a combination of life coverage and investment benefits. The choice between the two depends on the policyholder's financial goals, risk appetite, and investment preferences. It is important to carefully review the policy features and benefits of both before making a decision.

https://myrwealth.com/term-insurance-vs-ulip/

[economicbuddy]

Insurance vs Assurance – Let’s have a brief difference

Insurance and assurance are two types of common products which are widely sold in the market these days. But both insurance and assurance are two completely different products offering more or less the same thing which is confusing and misunderstood.

Here in this article, we will discuss insurance vs assurance which will help you to learn the key differences between both and how these two are separated from each other.

Insurance vs assurance

Definition

Insurance can be defined as the financial arrangement in which the insurance company commits or enters into an agreement to indemnify the loss of an insured person due to any kind of natural calamity or any personal mishappening that happens to the insured person.

In that case, the insurance amount might be small, or some percentage of this loss caused to the insured, or else it can also be a lump sum amount of money for which the insured has subscribed for.

On the other hand, assurance can be defined as an agreement between the insurance company and the insured person that the company will provide cover for an event that may likely happen sooner or later in the life of the person getting insured.

Objective

Insurance provides financial stability in case of any uncertainties where an assurance pays out predetermined money when an event takes place.

Allowable Number of Claims

One major difference between insurance and assurance is that all policyholders associated with insurance can file several claims, whereas those with assurance can only file one.

Different Types of Policies

Insurance generally includes things like car insurance, health insurance, and mobile phone insurance, among other things while Assurance involves life insurance, term insurance, endowment plans, ULIPs, and other financial products.

Principle

The primary principle of Insurance is the principle of indemnity on the other hand assurance is based on the principle of certainty.

Policy Duration

Insurance policies are usually for short-term whole life while the policies primarily based on assurance are usually long term.

The Nature of Risks

Another primary difference between insurance and assurance is that theft, burglary, catastrophes, fire, accidents, and other unknown risks are generally covered by insurance, while assurance only covers death.

Conditions

Insurance plans have several conditions on which the company decides what kinds of loss or damages are covered within that policy. Along with that, the amount is definitely payable.

On the other hand, an assurance general comes with specific plans or paths to save and protect a definite benefit at maturity. Thus they are usually life insurance plans, for example, whole life insurance, endowment plans, and to a specific degree term insurance.

Claim payment

The claim payment is approximately equal to the amount of loss in the case of insurance. For example, the cost of repair and replacement of vehicle parts, hospitalization bills, etc. are generally covered by insurance.

Whereas Pre-decided amounts are generally covered for a specific event in case of assurance. For example, a major illness such as cancer, the death of the policyholder, etc.

Conclusion

Although insurance and assurance are two similar things as they both provide financial compensation, both of them are quite different from each other in their scope and usage.

So it is very important for you to know, understand, and be well acquainted with all these terms if you want to purchase insurance.

Understanding the meaning and significant difference between insurance and assurance can surely assist you in better way to comprehend the insurance plan’s benefits.

[ethikainsurance]

Sum Insured vs. Sum Assured in Group Health Insurance

Before you choose a group health insurance for your company, it is important to research the difference between insurance policies. Insurance policy documents contain several technical terms that a policyholder needs to understand. For more information visit here: - https://www.ethika.co.in/blogs/sum-insured-vs-sum-assured-in-group-health-insurance/

[bimakaro]

Critical illness is something which can happen to any individual, and its treatment requires a lot of financial support. Indians are at an expanding danger of life-threatening infections, and there are numerous who are experiencing ailments like cardiovascular ailment and cancer, and that too, at a young age. In such a case, how can you get yourself secured financially against all such diseases?

Here comes the significance of critical illness spread, which is increasing due to the rising number of patients suffering from ailments like heart attack, cancer and organ failures. Because of the long tenure of treatment and the high expense of non-clinical and clinical costs, the critical illness cover is needed. The sum guaranteed is paid promptly based on the terms and conditions of the policy.

And, if you already have a medical insurance policy whether its an individual or family floater plan, at that point you may consider including critical illness rider in your existing policy or even buy it separately. Let’s get into the detail of critical illness insurance policy to have a better understanding.

Critical illness insurance policy

Critical illness policies cover life-threatening diseases that could even extend to a longer period of time and require specialised treatment. So, if secured with such policy, the insured and the policy nominee get the coverage amount in lump-sum following the policyholder is diagnosed with a critical illness. This amount can be used for the costs not covered by conventional health insurance policies.

The main thing to note is that a critical illness cover is not like a standard health insurance plan. Under a critical illness cover, the insured will get the coverage as a lump-sum amount if the insured gets diagnosed with a critical ailment. That money will deal with the expense of medical treatment for the disease and even used for paying off any pending loans. Whereas in health insurance, you get the claim depending on your medical bills which is further subject to the terms and conditions of the policy. A critical illness plan pays you the whole total sum assured independent of your medical costs.

Critical illnesses that are covered under a critical illness insurance policy

Critical illness insurance policy or rider mostly cover severe diseases like heart attack, cancer, stroke, kidney failure or paralysis. Every insurance provider has its own list of critical illnesses which might or might not differ. So, while choosing a critical illness rider or policy, you should go through the list of diseases that it covers.

Who should all purchase a critical illness cover?

Those individuals who have a family history of critical illnesses should opt for such cover. Often, the primary reason for critical illnesses is hereditary. For example, the risk of cancer growth is higher in case you have a family background of the illness. And thus, as a proactive measure, you should get a critical illness spread for a protected future and avail the best possible medical treatment.

The individuals who are the sole earner in the family should opt for a critical illness cover. Suppose you are the primary earning member of the family. In that case, it is necessary to protect the whole family with a critical illness insurance policy as you will never want your loved ones to be in financial distress when you get diagnosed with a critical illness. The policy or rider coverage amount will take care of your treatment cost while saving your hard-earn money from draining out. Besides, a critical illness cover can likewise make up for your loss of salary while you are not in a situation to work because of your medical issue.

Critical Illness policy vs rider

When you choose to secure yourself against any critical illness, you should pick between the alternatives of a standalone policy or you can likewise decide on a critical illness rider that comes with your standard term insurance policy or health insurance plan. Whereas a rider will be accessible for a much-lesser cost and will offer similar advantages like an independent critical illness policy. However, you should know about the limitations and adaptability that accompany a rider regarding expanding your sum assured. Therefore, if affordability is not a challenge, then perhaps you can opt for a standalone critical illness insurance policy.

From where you can buy one

While picking the insurance provider, you must focus on the terms and conditions of the policy as well as add-on benefits that are accessible; so that you opt for the right coverage as per your requirement. Another factor to consider is the case settlement procedure which ought to be simple and hassle-free. Also do check their claim settlement ratio to know their reputation in the market.

Hence, if you are wondering whether to opt for critical illness coverage or not, then hopefully this blog will help you to clear out your concerns. You can visit BimaKaro.in or speak to their financial advisors to get expert advice on a critical illness insurance policy.

Source:https://bimakaro.in/ik/term-life-insurance/why-should-you-consider-buying-a-critical-illness-insurance-policy-2223

[amanktreks]

Understanding Financial Options: SIP vs PPF, Small vs Large Mutual Funds, FD vs Life Insurance, and Step-up SIP

When it comes to securing your financial future, knowing which investment and savings options to choose can be overwhelming. From SIPs to PPFs, mutual funds, FDs, and life insurance, each comes with unique benefits and potential risks. In this article, we will break down some of the most popular financial options to help you make informed decisions for your long-term goals. We will cover key comparisons like SIP vs PPF, small vs large mutual funds, FD vs life insurance, and the advantages of a step-up SIP.

SIP vs PPF: Which Investment Option is Right for You?

Both Systematic Investment Plans (SIPs) and Public Provident Funds (PPFs) are popular investment choices in India, but they serve different financial goals.

SIP (Systematic Investment Plan): SIP allows you to invest regularly in mutual funds over a period of time. You can start with as little as INR 500 per month and gradually build wealth. The returns on SIPs are market-linked, which means they can fluctuate based on the performance of the stock market. However, historically, SIPs have offered better long-term returns compared to traditional savings schemes like PPF. SIPs are ideal for investors with a higher risk tolerance and a focus on wealth creation over the long run.

PPF (Public Provident Fund): PPF is a government-backed savings scheme that offers fixed returns, typically around 7-8%. The investment is safe as it is not market-linked, making it ideal for risk-averse individuals. PPF has a 15-year lock-in period, which promotes long-term savings. The interest earned is also tax-free under Section 80C of the Income Tax Act, making it a tax-efficient option for conservative investors.

In summary, SIP vs PPF boils down to your risk appetite and financial goals. If you prefer higher returns and can handle market fluctuations, SIPs are for you. On the other hand, if safety and tax benefits are your priority, PPF might be the better option.

Small vs Large Mutual Funds: Where Should You Invest?

Mutual funds come in different sizes, and choosing between small-cap and large-cap funds is a common dilemma for investors.

Small-Cap Mutual Funds: Small-cap funds invest in companies with smaller market capitalization, typically below INR 5,000 crore. These companies are often in their growth phase and have significant upside potential. However, they are also more volatile and risky. Small-cap funds are suited for aggressive investors who are willing to take on more risk for the possibility of higher returns.

Large-Cap Mutual Funds: Large-cap funds, on the other hand, invest in well-established companies with a market capitalization of over INR 20,000 crore. These companies are more stable and provide steady returns. While large-cap funds may not offer the same high growth potential as small-caps, they are generally safer and more reliable for long-term investments.

In essence, small vs large mutual funds is a question of risk and growth potential. If you are a conservative investor seeking stability, large-cap funds may be a better choice. But if you are looking for higher growth and are willing to accept greater volatility, small-cap funds may be more appealing.

FD vs Life Insurance: Which is Better for Financial Security?

When planning for your financial future, it's essential to understand the difference between a Fixed Deposit (FD) and Life Insurance.

Fixed Deposit (FD): FDs are one of the safest investment options where you deposit a lump sum for a fixed tenure, earning a guaranteed interest rate. The returns are assured, and you can choose tenures ranging from a few months to several years. FDs are best suited for individuals looking for stable returns without any risk of losing capital.

Life Insurance: Life insurance is primarily designed to provide financial security to your family in case of your untimely demise. While some policies also offer investment components (such as Unit Linked Insurance Plans - ULIPs), the primary goal is protection, not returns. In terms of investment, life insurance does not offer the same guaranteed returns as FDs. However, life insurance provides a safety net for your dependents, ensuring they are financially supported in difficult times.

In short, FD vs Life Insurance depends on your financial goals. If you are looking for investment and assured returns, FD is the better option. But if your goal is financial security for your family, life insurance is essential.

Step-Up SIP: A Smarter Way to Invest

A Step-Up SIP is an advanced version of the traditional SIP. With a step-up SIP, you can increase your contribution periodically, such as annually. This helps you stay ahead of inflation, maximize returns, and align your investments with your increasing income.

For example, if you start with a SIP of INR 5,000 per month and choose a 10% step-up annually, your SIP will increase by INR 500 each year. This strategy is excellent for those who expect their income to grow over time and want their investments to grow along with it.

Benefits of Step-Up SIP:

Higher Returns: By increasing your contribution gradually, you invest more over time, resulting in higher returns.

Inflation Protection: Your investments keep pace with inflation, ensuring your future financial goals are adequately funded.

Flexibility: Step-up SIPs allow you to start small and gradually increase your investments as your income grows.

Conclusion

Whether you are comparing SIP vs PPF, weighing the pros and cons of small vs large mutual funds, or deciding between FD vs life insurance, understanding your financial goals and risk tolerance is crucial. Incorporating strategies like step-up SIPs can further enhance your investment portfolio, ensuring that your finances grow as you progress in life.

By carefully evaluating these financial products, you can craft a well-rounded investment plan that meets your current needs while securing your future.

[insurancepolicypro]

Life Insurance coverage in Singapore – The Fundamentals of Complete Life and Time period Insurance coverage

This entire insurance coverage factor actually does take some time to wrap your head round. The phrases “entire life insurance coverage” and “time period insurance coverage” don’t actually imply or clarify very a lot to the common individual.

The typical Singaporean can also be educated from a younger age to run away from individuals who wish to have such conversations with you, as in the event that they had been contaminated zombies. Nonetheless, in some unspecified time in the future in your adulting, you come to the dreadful realisation that insurance coverage isn’t avoidable for ever and that there’s worth to getting a minimum of some form of life insurance coverage coverage.

We’re right here to arm you with some primary data earlier than you face an insurance coverage agent, so you understand what you’re entering into.

  Contents

Complete life vs time period insurance coverage – what’s the distinction? Endowment vs investment-linked entire life insurance coverage insurance policies What’s the distinction by way of premiums (value)? Who should purchase entire life insurance coverage? How does “restricted pay” work? What’s “give up worth”?

  What’s the distinction between entire life and time period insurance coverage?

An insurance coverage coverage supplies safety for monetary losses suffered from a selected occasion. Within the case of life insurance coverage, the “occasion” is the lack of your life, or within the case of complete everlasting incapacity (TPD). To place it merely, a life insurance coverage coverage is designed such that in the event you die, the insurer’s payout ought to be sufficient to your dependents to reside on when you’re gone.

However before you purchase any form of life insurance coverage, you’ll want to determine whether or not you’ll go for entire life insurance coverage or time period insurance coverage. What’s the distinction between them, and which is best for you?

Time period insurance coverage Complete life insurance coverage (endowment) Complete life insurance coverage (investment-linked)

Essential goal Safety Safety + potential to develop financial savings Safety + potential to reap funding returns

Protection Most plans cowl dying and complete everlasting incapacity (TPD)

Protection Interval A selected time period interval or as much as a particular age Normally as much as finish of life Normally as much as finish of life

What’s paid upon dying of insured? Sum assured Sum assured + accrued bonuses if any Sum assured + worth of models in fund

What’s paid if coverage is surrendered early? Nothing, since there isn’t any money worth Money worth (assured + non-guaranteed bonuses if any) Worth of models in funding sub-fund

Each time period and entire life insurance coverage present safety within the occasion of complete everlasting incapacity (TPD) and dying. The 2 principal variations between them are: (a) how lengthy the coverage will cowl you and (b) how a lot cash you get again if nothing occurs to you.

Time period insurance coverage supplies you with safety just for a set time frame, say 20 or 30 years, after which the plan expires. If nothing occurs to you and also you don’t make a declare, you get nothing (aside from a letter thanking you for giving them cash for the final 30 years).

Such a protection is cheaper, and it is smart in the event you plan to offer to your dependants for a restricted time. For instance, till your youngest little one finishes tertiary schooling.

Alternatively, entire life insurance coverage covers you until the tip of your life, so long as you proceed to pay the premiums.

It’s rather more costly, but it surely has the potential to develop the cash you paid. The potential progress varies relying on whether or not your entire life insurance coverage is an endowment plan or an investment-linked coverage (ILP). Extra on these within the subsequent part.

In both case, the “benefit” of entire life insurance coverage over time period insurance coverage is that, even in the event you terminate and give up the coverage, you may get again a number of the financial worth.

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  Endowment vs investment-linked entire life insurance coverage insurance policies

In Singapore, entire life insurance coverage often features a financial savings or funding part, named endowment and investment-linked coverage (ILP) respectively.

Resulting from these options, some individuals see their entire life insurance policies as an funding/financial savings plan as an alternative of simply being a plain previous safety plan. These added options make entire life insurance coverage costlier than time period insurance coverage.

Endowment Insurance policies

Endowment insurance policies are sometimes seen as a method that can assist you construct up monetary self-discipline because the financial savings part is constructed into the month-to-month insurance coverage premiums.

For example, let’s say you pay a month-to-month insurance coverage premium of $250 to your endowment coverage. Of this quantity, $100 would possibly go into the insurance coverage safety part, and $150 will go into the financial savings part.

After a set interval of say 20 years, it is possible for you to to get again a number of the money worth accrued, relying on the assured and non-guaranteed advantage of your coverage.

Funding Linked Insurance policies (ILP)

For an ILP, the financial savings part will likely be changed with an funding part the place a part of the premiums go into shopping for models in funding funds.

In contrast to endowment insurance coverage insurance policies, ILPs often don’t include assured values. The worth of the ILP relies on the efficiency of the fund you’ve purchased into. So yeah, you could possibly get zilch if issues don’t go effectively and this represents a possible alternative value as you could possibly have made that cash work some place else for you.

Some customers like ILPs as a result of they like the concept they will make investments and have monetary safety by way of a single monetary product. There’s even have a variety of funds to select from that fits totally different funding targets and danger urge for food.

Whether or not you select to purchase a time period insurance coverage, endowment plan or ILP, the primary factor is to determine in case your selection fulfils your monetary goal and takes into consideration the long-term prices concerned.

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  Let’s evaluate the premiums for entire life vs time period insurance coverage

Whereas life insurance coverage was the “go-to” insurance coverage for most individuals, with elevated monetary literacy, extra individuals are open to getting time period insurance coverage as an alternative.

One of many best benefits of selecting a time period insurance coverage as an alternative of a life plan is the substantial financial savings you get from decrease premiums. So if you understand you want insurance coverage safety however are in a section of life the place you possibly can’t afford setting apart very a lot each month, this turns into your best option for now.

Right here’s a simulation of how a lot insurance coverage premium an individual pays for all times and time period insurance coverage based mostly on the next standards: 35-year-old man, non-smoker with sum assured of $500,000. Let’s name him Mr Siva.

Kind Life insurance coverage coverage Annual value Whole quantity paid

Time period FWD Insurance coverage Time period Life $510 $510 x 30 years = $15,300

Time period Nice Japanese Max Time period Worth $840 $510 x 30 years = $25,200

Complete life NTUC Restricted Pay Safety $10,038 $10,038 x 29 years = $291,103

Complete life AXA Life MultiProtect $13,440 $13,440 x 30 years = $403,200

As you possibly can see, the distinction within the quantity of premiums paid between time period and entire life insurance coverage is big.

This is the reason some monetary advisors even advocate “purchase time period and make investments the remaining”. In different phrases, purchase a time period coverage for the required safety, after which use the cash you didn’t use to take a position. This can be a technique that has the potential to develop your cash in the event you make the appropriate funding selections.

Alternatively, some customers prefer to get an entire life coverage as a result of it presents some money worth do you have to determine to give up the coverage.

Primarily based on the assured give up worth (after 30 years) for the above entire life insurance policies, one can anticipate to obtain $246,000 and $307,000 for the NTUC and AXA plan respectively. Utilizing these values, it signifies that the full premiums paid to your entire life coverage will likely be diminished considerably this brings it extra on-par to time period plans by way of value.

One necessary consideration when selecting to take up a time period plan is that the protection time period could expire at a time the place you’ll proceed to wish safety (or want it most).

For the above case, the time period plan will expire when Mr Siva is 65 years previous. Relying on his state of affairs, Mr Siva could wish to proceed getting life insurance coverage protection for one more 20 years.

Nonetheless, relying on his well being at 65, some firms could think about him “uninsurable”. Even when he does qualify for a brand new insurance coverage plan, premiums are going to be very costly at that age, and he could not be capable of afford them throughout his retirement years.

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  Who should purchase entire life insurance coverage?

Whereas it might appear that the “purchase time period and make investments the remaining” mantra makes complete financial sense, there are cases the place shopping for entire life insurance coverage is usually a better option.

Whether or not you want life insurance coverage actually relies on your stage in life. If you’re a younger 20-something with no dependents and restricted obligations, you’ll possible not want an entire life insurance coverage coverage.

However say you’re 40-year previous, and the only breadwinner in a household with two younger youngsters and aged dad and mom. In such a case, entire life insurance coverage can assist to offer monetary safety to your family members whereas concurrently serving to you construct up some retirement funds to your golden years.

Life insurance coverage protection is a method of caring for your loved ones, since you don’t need them to endure when any misfortunate befalls you. In a survey by NTUC Revenue revealed in April 2019, 48% of 329 married adults surveyed expressed that they had been motivated to purchase life insurance coverage as a result of they need their family members to take care of the identical lifestyle when catastrophe strikes.

The opposite state of affairs the place entire life insurance coverage could make sense is to your younger little one. You would possibly assume, “why would my 2-year previous want entire life insurance coverage?”

For one, it ensures insurability and no-exclusions since most younger youngsters have a clear invoice of well being. Many dad and mom additionally take up an entire life coverage with endowment plan with a view to begin saving for his or her little one’s future schooling. Additionally, your little one is prone to get pleasure from decrease premiums when getting insured from a youthful age.

For those who’re getting an entire life coverage for a kid, selecting a restricted pay possibility will be a good suggestion. Your little one can get a life-long protection with premium funds for as quick as 12 years. It may well thus be a significant present for a younger little one as an alternative of saving cash in a financial institution deposit account that can’t beat inflation.

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  How does “restricted pay” work?

Getting a life insurance coverage with restricted pay interval means you solely have to pay premiums for a restricted variety of years in change for a lifetime’s protection.

Say for example, Andy (male, non-smoker, age 35) decides to make premium funds of S$250 per thirty days for under 15 years for his entire of life plan up until age 50.

For the subsequent 15 years, Andy pays about S$45,000 for a sum assured of S$100,000. The insurance coverage protection will proceed for remainder of his life even after he ends his premium cost at age 50. Relying on his insurer and plan, he’ll possible even be entitled to some accrued money worth if he surrenders his coverage when he reaches 65 years previous.

  What is that this “give up worth” factor?

Once you purchase a life insurance coverage, you could have a give up proper – the chance to terminate your life insurance coverage contract in change for its money worth. You may solely do that in the event you’ve not made any claims earlier than.

Once you select to give up your coverage, you’ll hand over the remaining protection whereas your insurer presents you with a money give up worth, which is how a lot cash you’ll obtain in return.

Do observe that the give up worth of your coverage will likely be decrease than the dying profit payout. Which means you’ll obtain much less cash by surrendering your coverage as in comparison with having the dying profit once you move on. Thus, it’s usually not advisable to give up your coverage. Not solely will you lose out by way of financial worth, however taking over a brand new insurance coverage coverage at a later age will most likely incur the next premium cost.

In the end, there’s no proper or incorrect in selecting whether or not to get a time period plan or entire life insurance coverage – all of it relies on what you want and the way a lot you possibly can afford.

Complete life insurance coverage prices extra, however it may be a handy possibility for many who need each monetary safety in addition to a financial savings/funding part. Alternatively, a time period life insurance coverage plan presents a terrific cost-effective possibility for many who need (solely) pure safety.

What are your ideas on shopping for life insurance coverage? We wish to hear from you.

  Associated articles

Well being Insurance coverage in Singapore – The whole lot You Must Know to Survive 2018

The Most cost-effective Automobile Insurance coverage Insurance policies in Singapore (UPDATED 2018)

The Finest Journey Insurance coverage in Singapore – 2018 Overview

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Tags: Featured, Life Insurance coverage

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Should you revive your old term insurance policy or buy a new one?

The world we live in has changed completely over the past two years. The pandemic, and the millions of deaths it has caused, has made us realise how uncertain life is.

And as people worldwide keep succumbing to the deadly COVID-19 disease, the perspective around life insurance, too, has changed. It is now necessary for everyone to ensure that no matter what happens tomorrow, their future, and that of their family, is secure.

Policy lapses and renewals

When it comes to securing your family’s future, life insurance is key. You may have a policy in place, but it’s quite possible you miss a premium payment for some reason or the other and the policy lapses. The good news is that you have the option of reviving the policy. Even so, it’s important to understand what works better for you — reviving your lapsed policy or buying a new one altogether. Let’s understand this in detail.

When does a policy lapse

Benefits of the term insurance plan are available to nominees of the policyholder as long as the premiums are paid on time and the policy remains active. If, for some reason, a policyholder fails to pay the premium before the due date, he or she can do so within 15–30 days’ grace period. In case the premium is not paid even during the grace period, the policy lapses.

How to revive a policy

The lapsed policy can be revived within five years of the last date of its first unpaid premium. To revive a lapsed policy, one needs to pay the accumulated unpaid premiums along with interest and taxes. Depending on the policy terms and conditions, the policyholder may also have to pay a penalty and revival charges. If more than six months have passed since the policy lapsed, the policyholder may also need to undergo medical tests. Under certain special schemes, they can get a discount on these charges.

Reviving a lapsed policy vs buying a new one

It’s possible that a policyholder may have been unable to pay the insurance premium for some reason or may have even forgotten to do so, causing the policy to lapse. At a later point of time, he or she may again feel the need to possess life cover. In such a situation, the policyholder has two options — reviving the old term insurance policy or buying a new one. This dilemma is confronted by many and there is no single solution. The choice varies from case to case.

Because reviving the lapsed policy attracts additional costs apart from the unpaid premium, these must be taken into account while making a choice. On the other hand, buying a new policy would mean a higher premium because you bought your lapsed policy when you were younger and with years having passed, the new premium would most likely be higher. There is, however, a possibility of getting good cover at an affordable price with technology making insurance policies cheaper, especially when you buy online. So one must compare insurance plans offered different insurers to get the best deal.

Having taken all these factors into account, one would realise that sometimes it makes more sense to renew your lapsed policy and at others, it is better to buy a new one.

In cases where the old policy was bought a long time ago and lapsed a short while back, it often makes more sense to revive the policy since the difference in premium between the lapsed policy and a new one would be too wide. In some cases, insurers offer to waive interest and penalty charges to revive a policy. This is a good opportunity to revive the old policy and it makes financial sense.

If the old policy was bought recently and not many premiums were paid, it may make more sense to opt for a new one as the cost of reviving it may outweigh the benefits of staying with it. Better options at comparable premiums may be available from other insurers.

Enhancing coverage with a new policy

If a policyholder is not satisfied with the coverage offered by the lapsed policy, which could be due to an inadequate sum assured or absence of riders, he or she may consider buying a new one. It would make more sense to enhance the coverage to suit your evolved needs.

Most insurance companies keep coming up with new features to cater to the consumer-centric insurance market. If, at the time of buying the policy, you could not opt for a useful feature that is available now, you may opt for a new policy. For instance, some policies now come with an exit option where if you want to discontinue your policy, you would be paid back all the premiums that you have paid until then for the base protection. Some policies also come with a benefit wherein, if the policyholder dies, a life cover will start in his/her spouse’s name which will be half the life cover of the policyholder and the nominee will receive the sum assured. Such factors need to be taken into account when you decide whether to revive a lapsed policy or purchase a new one.

In conclusion, the choice between reviving an old policy and buying a new one will vary on a case-to-case basis. The best option is always to ensure that your policy remains active and the premiums are paid on time. If, for some reason, your policy lapses, get yourself covered as soon as possible irrespective of whether you choose to revive your old policy or decide to opt for a new one.​

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Credits: Sajja Praveen

Date: June 1, 2022

Source: https://www.moneycontrol.com/news/business/personal-finance/should-you-revive-your-old-term-insurance-policy-or-buy-a-new-one-8615861.html