Why should one buy an insurance policy? To secure one’s loved ones against the risk of financial instability and struggle that will inevitably follow if some untoward incident like death or disability happens, right?

Now, there is a plethora of insurance policies available in the market – term policy, endowment policy, retirement benefits policy, whole life policy and many more. A common investor may get confused as to which one is the right option for his wallet and which one will serve his family’s needs to the best.

Hence, it is necessary to understand the types of life insurance available in the market and more clearly, your needs, desires and capabilities when it comes to insurance, and adhering to this commitment till the end of the policy term. Only then you can make the right choice.

Let’s first understand what whole life insurance or endowment insurance is. These policies not only insure the person against the risk of loss of life and resulting loss of income to the family but also create an investment pool on behalf of the assured, which will be given to him by the insurance company at the end of the policy.

Thus, endowment life policies serve the dual purpose of risk management as well as savings. But, these policies are much more expensive in terms of higher premium payments than term life insurance policies. The rate of return earned on investments is also moderate and if surrendered during the term of the policy to meet any exigency, the assured cannot realise the full-accumulated cash value of the policy. Thus, opting for whole life or endowment policies becomes an expensive option of insurance, which may not be affordable to every investor.

Term Insurance can be a better choice for those who have limited amount at their disposal to buy insurance and yet want a safe shield for their families. Term policy is a pure insurance vehicle, which assures the person buying insurance against the risk of untimely death or disability. So, if the assured dies during the term of the policy; the beneficiary will get the proceeds under term policy. If the assured outlives the policy, the risk cover expires after the term is over.

Generally this term is anywhere between 10 to 30 years and the premium to be paid is very low as compared to whole life policies. Thus, this is an ideal and very much affordable insurance solution for the people with lower income bracket. On the other hand, people with high risk appetite and astute investment skills can also deploy their investible surplus in other options while securing investment benefits under Term life insurance at minimal costs i.e. premiums.

An investor can choose any amount of sum assured and have the risk cover for a longer period – up to 30, 35 years – keeping in mind his present income as well as number of dependents. The earlier the term insurance is taken, the cheaper it becomes because the premium is based on the age and medical condition of the assured. Younger people are likely to pay much less premium for the sum assured. Hence, term insurance becomes all the more affordable and attractive insurance strategy that all must exercise at an early stage.