Why do you need this?
For financial protection or coverage
A life insurance policy pays out an agreed amount known as the sum assured under certain circumstances. This will be paid to you if you are permanently disabled or critically ill, if your policy provides for this, or paid to your estate if you are no longer around. This money is intended to help you meet your financial needs and / or those of your dependants if these events happen. Life insurance provides financial protection or coverage against these risks.
The life insurance policy contract is between you and a life insurance company. In return for this protection or coverage, you pay a premium for an agreed period of time, depending on the type of policy you purchase.
For retirement planning, savings or investments
Life insurance policies are often marketed to meet retirement planning, savings and investment purposes too. For example, an annuity can provide an income during your retirement years.
Life insurance products like whole life and endowment participating policies or investment linked plans (ILPs) bundle together a savings and investment element with insurance protection. Hence, for the same level of insurance cover, the premiums will cost more than for a pure insurance product like term insurance.
Bundled products tend to build up cash values over time. These are paid out when the policy matures or is surrendered. Death benefits that include cash values are paid out upon the death of the insured. Term insurance does not build up cash values.
Bundled products are often marketed as savings products because a part of your premiums is invested to build up cash values. But unlike savings deposits where you generally expect to get back the amount you saved, the guaranteed cash values of an insurance product may be less than the total premiums paid. While part of your premiums will pay for insurance protection while the rest is invested and subject to investment risk.
If your aim is to protect your family’s well-being, make sure the product you buy meets your protection needs first. You should consider term insurance if all you want is life insurance coverage.