Buying life insurance plans is a way to ensure the wellbeing of your family and prepare them to face any chances of a bleak future. While most people do not want to think of it or avoid talking about it, life is full of uncertainties and it is better to stay prepared for them while hoping for the best, rather than turning a blind eye towards them. Buying life insurance is one of the simplest ways to ensure that you are taking care of your family, even when you are not around.
Given the importance of the role it plays, life insurance policies need to be chosen wisely. It is better to take the time to study and compare plans to find out which one suits you the best, rather than choosing a policy simply because it is easily available. Using life insurance premium calculators, available on policy pages, may help you decide on which policies are more suitable for you.
Apart from premium estimates and policy features, there is another important aspect that you need to consider when buying life insurance plans, i.e., guaranteed vs non-guaranteed plans. Before understanding what is guaranteed and non-guaranteed life insurance, it is essential to ensure that you understand well what life insurance is, and how it helps you.
What is Life Insurance?
At its core, life insurance is designed for the person insured to be able to create a financial safety net for their family when they are no longer around. When you buy a life cover for yourself, you enter a contract with the insurance provider. As part of this contract, you are required to pay either a single premium or regular premiums. In return, the policy provider will offer a death benefit to your loved ones if you were to pass away during the tenure of the policy.
You are also required to name a nominee in the policy. The person nominated will be able to claim the death benefit from the policy provider if a need were to arise.
There are various types of life insurance plans available online as well as offline. Each of these may have some unique features that make one plan more suitable than the other for a buyer. For example, term plans are known to be more affordable than other types of life insurance, whereas endowment plans are known for the savings benefits they offer while being relatively short in duration.
Apart from plan features and premium costs, another important factor to consider when buying life insurance is whether the plan is guaranteed or non-guaranteed. Let’s take a closer at what these terms denote and the difference between the two.
Guaranteed Life Insurance Plans
In simpler terms, a guarantee is a formal assurance that the seller will bear the responsibility of any product-related risk once the product is sold to the customer. In the case of routine, tangible products, a guarantee refers to the seller or the manufacturer assuring the consumer that if their product is faulty, or breaks down within a certain period, they will be provided services to either repair or replace the products. The details of what entails a “guarantee” may differ across products and their guidelines as set by the company.
In terms of life insurance, the phrase “guaranteed” assumes a slightly different form. Here, when you buy a guaranteed policy, you are assured of the continuation of the policy for as long as the premiums are paid on time. Failure to pay premiums usually leads to a policy lapse, after which you may have to revive the policy to avail of the benefits again.
When you buy a guaranteed life insurance policy, it is assured that the premiums you are required to pay regularly will remain the same throughout the policy duration. Hence, you will not have to worry about increased policy costs even if the insurer hikes their premium rates.
Non-Guaranteed Life Insurance Plans
As opposed to guaranteed insurance plans, non-guaranteed policies are the ones where your premium amounts may not remain steady. These plans may require you to pay a certain amount for the first few years of the policy, and a different amount in the later stages, depending on the market situation and prevailing costs of life insurance.
Guaranteed life insurance plans are more commonly available. With them, you can rely on your plan costs being steady throughout the decided duration. This allows you to plan ahead and maintain the policy better. On the other hand, buying non-guaranteed life insurance plans may be preferable for people who are comfortable paying variable premiums to avail of any other features these policies may offer.
