Life Insurance

Guaranteed Or Non Guaranteed Life Insurance Policy

Nov 15, 2021

It has become very easy to buy life insurance these days. You can go online and make a purchase instantly. However, while the actual process of buying a plan is simple, the steps involved in choosing the correct plan are a bit more complex. You need to choose the plan with a lot of care. Right at the offset, you need to decide what type of life insurance you need. You can choose between options such as term insurance, endowment plans, money back plans, retirement plans, ULIPs, etc. Then, you need to work out the perfect sum assured as well as the correct policy period. Then, you need to zero in on the premium you wish to pay. Another very important point to consider at this step is whether you wish to get a guaranteed or non guaranteed life insurance plan. 

What is guaranteed life insurance? 

Let us begin by understanding what a guaranteed life insurance plan is. A guaranteed life insurance plan is a regular life plan where the premium and the returns are pre-decided and fixed for the entire duration of the policy. You agree upon the amount while buying the plan and then pay the fixed premium for the total tenure. If you die while the policy is active, your nominees receive a fixed sum assured. It is a common and straightforward type of life insurance.

What is non-guaranteed life insurance? 

Non-guaranteed life insurance is a type of term insurance where the premium amount fluctuates. The tenure of the policy is also shorter. If you buy a non-guaranteed life insurance plan, you may have to pay a fixed premium for a few years and then, the premium will decrease or increase, depending on the conditions of the financial markets. You may have to pay a higher premium as well.

Choosing the correct plan

As mentioned above, you need to choose the correct plan based on your specific requirements. Here are some factors to help you decide the ideal coverage:

  • Coverage - Your first concern should be to understand the volume of the life cover needed. For this, you need to calculate the needs of your family. For instance, if you have a large family with many dependent family members such as your kids, your spouse, your siblings and your parents, you need a substantially large life cover. If you live in a nuclear family, a smaller coverage may be enough. Other factors to take into account include your income, your age, etc. Calculate properly and you will have the most wholesome life cover that will help your family if and when needed.
  • Tenure - Next, you need to know the correct duration for which you need to stay covered. Ideally, someone should stay covered for as long as he works and earns an income, which for most people, is 60 years of age. If however, you feel your financial responsibilities will stretch beyond that time, stay covered for as long as your family needs you to do so.
  • Affordability - While it is natural for you to want a high cover for the highest duration possible, you should be realistic and choose a plan that you can afford. Keep an eye on the premium. It should not be too high, as then you won't be able to afford it and keep your life insurance plan active at all times. 

In conclusion

You can choose to have a guaranteed life insurance plan or a non-guaranteed life insurance plan. Either way, your prime objective should be to have a sufficient life cover that can aid you while you are alive (by offering tax benefits, rider benefits, etc) and help your beneficiaries after your demise. Go over your requirements and then choose a good guaranteed or non-guaranteed life insurance policy.

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