Term Insurance Plans are Vital for Retirement Planning

term insurance plans

Retirement planning is essentially like planning for an upcoming road trip and a comprehensive term insurance plan serves as a roadmap that helps navigate the journey easily. Over the years, many individuals have understood the importance of term insurance, prompting a hike in insurance purchases. The Indian life insurance industry recorded a surge of 13% Y-o-Y in total premium earnings, amounting to a huge Rs. 7.83 trillion in the financial year 2023. However, despite growing uptake in insurance products and awareness even now the country is struggling to enhance individuals’ access to insurance.

Since understanding customers’ needs to make insurance plans affordable to the masses is such a crucial step in increasing accessibility, many insurance companies are rolling out strategies such as leveraging technology to simplify policies, customize plans as per customer needs, and distribute product plans. To further boost term insurance penetration in the country, the IRADI has been working to implement initiatives like the Bima Vistaar, Bima Sugam, and Bima Vahak. Such initiatives are designed to make insurance plans simple, accessible, and tailored to the needs of the common people. 

Categories of Insurance Products and Innovations

Over the years insurance forms have shown limited initiative to innovate their products. Typically, insurance companies offer three distinct categories of insurance products –

  • Health and life protection 
  • Annuities
  • Long-term savings

However, product innovation across these categories is continuous and gained a significant boost thanks to regulations such as the sandbox, use and file, and more. Such initiatives have helped insurance policyholders to adapt to the changing needs of the consumers. Previously life insurance plans used to be basic and simple, i.e., choose among basic term insurance plans or a term plan with a premium return. Nowadays, insurance companies offer individuals a selection of plans with exciting new features tailored to their coverage.

For instance, in the Life Stage-Based Covers, the life cover tends to grow automatically as the insured’s needs change through their different life stages or milestones. In case of Early Return of Premiums, the insured gets a part of their money back during the active insurance policy term, not just at the term’s end.

Similarly, for the Life Continuity Option, the beneficiary of the policy will receive the plan’s death benefit in the form of a monthly payout, which will prove useful in easing their financial strain and facilitate better management. Notably, these are a few examples, and today, more options are available to the public. Individuals who are aware of their needs and requirements can easily find the best life insurance plan to protect their loved ones.

Factors to Consider in Plan Retirement Through Insurance 

Retirement planning is essentially about asking key questions – the desired age to retire, the corpus needed to retire comfortably, and the amount you have already accumulated. Having an insight into these aspects gives an idea about how to initiate retirement planning and how to approach the same with an insurance product. 

However, such an approach would work only if an individual invests in the right kind of products that can help build a corpus and provide necessary protection against situations that tend to erode savings. In addition, it is crucial to begin one’s retirement planning early to ensure the process is smooth and effective. Starting early enables individuals to save regularly and helps them build a disciplined approach to saving and investing. In addition, such an approach helps to make the most of the Power of Compounding feature.

Typically, retirement planning can be categorized under two phases – the first being accumulation and payouts. Fortunately, insurance providers today extend plans that help meet these two areas of focus. To elaborate, in the accumulation phase, individuals can avail of insurance products like a unit LinkedIn insurance plan if they are comfortable with market-linked investment options. However, individuals who do not have a strong risk tolerance level and do not want to expose their savings to market risks can opt for more traditional products like endowment plans and money-back plans. They may also consider options such as NPS to plan their retirement. 

On the other hand, the payout phase is most useful when individuals need a steady income flow. In this case, individuals can consider getting an annuity plan from insurance companies. A plan like this can guarantee a flow of income for life. However, it is crucial to note that insurance companies can extend guaranteed earnings as long as the insurance provider lives.

Besides, selecting the Joint Life product ensures the insured’s spouse or beneficiary will avail of regular income for the rest of their life. 

ULIPS vs Endowment Plans – Which Option Would be the Best for You

Unit Linked Insurance Plans, trading insurance plans, and fixed deposits all represent distinct financial tools with distinct features and attributes. Notably, each plan is designed to cater to different needs and financial requirements. 

The things about insurance savings plans, such as Unit Linked Insurance Plans, endowment, and money-back policies are ideal means to accumulate wealth over time. 

They are structured to help individuals achieve their long-term goals and pave their way to their objectives. However, selecting one of these savings’ investment options depends entirely on one’s financial standing, risk appetite, and goals, along with their need for savings and protection.

On the other hand, traditional insurance plans offer individuals a risk-free benefit. Thanks for elaborating, no other savings product guarantees return on investments to individuals. On the other hand, these products help mitigate the risk associated with reinvestment. Additionally, they help offer a reliable income that doesn’t get hampered by rate fluctuations.

This key feature helps individuals who intend to save for the long term, especially to meet goals such as kids’ higher education or generating an additional income stream. 

Moreover, the ability to generate assured and stable returns through life cover ensures financial security. Collectively, these features and associated benefits made the term insurance plans lucrative and efficient for individuals. This is why it is important to compare features and check their exclusions to pick a product that suits one’s needs the best.