Traditional Insurance Policies-- an Overview

Tax benefits, risk cover, fixed income returns, safety benefits are some of the terms which can be used to define the traditional insurance plans. At the early days of insurance, it was difficult for the people to accept this new concept of insurance. The main feature which people used to focus is that they have a minimum risk for the money they invest. These traditional insurance plans are still in usage, this is because even today we find people who wants very low risk of their money.

Defining Traditional Insurance

The characteristic feature of the traditional insurance policy plans are guaranteed bonus and sum assured. The best part of these traditional insurance policies are there are almost no downside probability with a very less risk in the high risk equity. Keeping in mind about the tax planning, people may opt of these plans. The main disadvantage associated with this traditional insurance policies are the user cannot avail any premature withdrawal.

However, one can avail the money back since these policies offer very less amount of sum assured at high premiums. This iswhat the major disadvantage with these policies, i.e., one need to pay high  premium amount in order to get higher sum assured. The skeleton of these policies can be simply stated as if the beneficiary of the policy will get the sum assured and the other bonuses, if the insurer dies before the end of the policy term. The sum assured, with additional loyalty and other bonuses are given to the insurer if he or she survives till the end of the plan.

Benefits and Limitations

The traditional insurance policies serve best in offering the insurer with the benefit of protection at affordable plans, including the protection against various financial storms like retirement, disability or even death. Perhaps, these will provide a temporary solution for the financial needs. The other side of these policies are they cannot meet up the rising costs, cannot offer a solution for the financial issues of aging people. As it is said that a coin has two sides, every policy has both advantages and limitations. One need to choose such a plan that fits to their needs.

Buy A Cover That Meets Your Requirement

Instead of buying life insurance cover which is inadequate for your needs it is recommended that you spend that sum for other personal purposes. There is no point in buying a cover that does not meet your requirement. It is like throwing away your money and similar to purchasing temporary term life insurance.

Two big questions that bog one’s mind before buying insurance is: How much life insurance you need and the term duration you need it for.

How Much You Need?

How much you need is indeed important as it is better to ensure that you purchase only as much as you need. Having decided on a particular sum you may choose even expensive permanent policies if can only afford to buy less. Remember, the idea behind purchasing insurance is to ensure that your family remains financially independent should something happen to you. On the other hand there is no point in buying very expensive covers as you would be spending more on paying premiums than you or your family will receive. The prospect of receiving less does not make sense and only means that your expected return on those premium dollars is negative.

How Long You Need?

How long will you need the insurance depends on the purpose you want to use the cover for. The permanent insurance is of course useful and expensive as it will be covering you for your entire life. You may choose less expensive term policies and they are cheap if you are young. Most of these policies are of not much use and again if you have retired you won’t need any life insurance cover. The retired generally are too old to have dependents and if they have a spouse he or she will usually be living on their social security.

Retired And The Insurance

The retired too may purchase insurance cover: For instance if an individual has a dependent with very meager income to live on after they pass away. Pension maximization can be useful if the person is in good health and can get low cost policy. Some of the retired who do not have resources to cover their funeral costs may opt for a policy to cover these expenses to spare their family of these costs.