Why you need protection plans?

Insurance protection policy is a plan for the unthinkable, which provides financial security to your family

  • Why you need protection plans?

By OLM Desk

A big fear for most people revolves around how their family members will cope financially, if something unimaginable happens to them. To a large extent, life insurance offers peace of mind through immediate financial protection for one’s dependents.

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It is unique in guaranteeing the delivery of financial security at precisely the moment it is needed. There are several types of life insurance policies—pure protection, endowment and whole life. Then there are variants of these, besides Ulips, which combine insurance and investments. Almost, every type of financial need is met by life insurance, which makes it a unique financial instrument.

In recent times, the role of protection policies has gained popularity for several reasons. Primarily, protection plans or term plans, as they are known are easy to comprehend and cost less by way of premiums one pays for insurance policies. Term policies provide insurance cover for a set period of time, known as the policy term. If the insured passes away during the term, the beneficiaries listed in the policy receive the policy’s death benefit. Term policies are available for long period of up to 30 years and may be renewed further depending on the insured’s age.

Term plans are pure risk cover and it does not combine savings or investments and only sticks to providing insurance cover to the policyholder. However, you could add a rider to the term plan such as critical illness or disability rider to enhance the scope of the term cover.

The way term plans are structured, you can define the payout as a lump sum or as a monthly payout. The monthly payout is similar to creating an income stream, which is easy to manage and comprehend for your beneficiaries. Each month for a defined number of years, your dependents will receive a monthly payout, which will help them manage their day-to-day lives.

Other than providing an income replacement, term plans could also be used to protect against liabilities to take care of loan repayment in your absence, considering that it is common for people to run up loans when buying a house or a car. The simplest way is to take a term plan against the loan outstanding to take care of liabilities than create financial discomfort for your family.

The emotional impact of losing a family member is irreplaceable but the financial impact can be managed with a protection life policy—do not delay or compromise in taking one.