How many types of Life Insurance policies should I have?

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How many types of Life Insurance policies should I have?





Actually I am very confused….. Should I have Mixed Bag Insurance or just 1 type of Life Insurance policy is good enough?


How many types of Life Insurance policies should I have? Well, there is no definite answer for the same. It depends on how you perceive your needs and if there is one type of life insurance policy that suffices for your needs then be it so. However in most cases, people are not fully aware of their own financial requirements and hence are very confused as to what type of life insurance policy he should buy!

Insurance is a product which should be purchased only after self analysis of financial requirements. I agree that doing the self analysis of financial requirements is not a cake walk but it is not an impossible deed. With time and patience and endurance, it can definitely be done.

Right now, I am not getting depth of how to do self analysis of financial requirements. Rather I would get into the step 2 of the process, where you need to decide which products to purchase once you know what you need. This step is equally, if not more, critical and important in nature and equally challenging. You must also understand how to choose your portfolio once you are aware of your financial needs and requirements.

Ideally everyone should have a combination of at least 2 to 3 policies. Statistics prove that an average earning individual buys 7 life insurance policies in his entire lifetime. But it doesn’t mention how many TYPES of life insurance policies an individual purchases in his lifetime.

According to me, any Portfolio should be a mix and match of various products, of different tenure and sum assured, depending upon requirement. You should never put all your eggs in just one basket.

The most common types of life insurance policies which are must-haves are:

  1. Term Plan– If you are earning member of your family and your income contributes to the daily expenses of your family, then your family would suffer financial loss if that income were to stop for any unforeseen event in your life. Thus having a suitable life cover is extremely important in this case. Since Term plans are the easiest and cheapest solution to life cover, it is said that each and every earning member must have a Term Plan for himself.


  1. Whole Life Plan– If you the sole earning member for your family, with dependents, then you must have a Whole Life plan to cover for your life. Since you are the ONLY earning member for your family, your family would suffer severe financial difficulty at any time that you would die. Thus, to combat this problem, you can take a Whole Life Plan which is basically an extended term plan with unlimited term such that your family would get money whenever you die!


  1. Decreasing Term Plan– is mandatory if you have a loan. This is because, if your die before you repay your loan, then the burden of your loan would fall on your family and they would have to repay the same on your behalf. However, if you have a Decreasing Term Plan, such that the sum assured decreases each year along with the decreasing loan liability, then your family would be saved of this burden and your soul would rest in peace!


  1. Pension Plan– is a very form of insurance policies and comes extremely handy when income stops. To create income post retirement, pension is the perfect solution, so that you do not have to stay at the mercy of other members for your well-being.
  2. Endowment Policies– For any asset building along with reasonable cover, this type of plan comes very handy, since it provides low interest but assured return. It is basically an investment product for risk averse person who prefers safety of capital than high and lucrative returns.


  1. ULIP, or Unit Linked Insurance Policies- When investment becomes almost as important as protection and returns are measured as against market performance, then ULIPs are the best solutions as it provides market linked returns along with death benefit of the life insured.


Since you have such a vast variety of life insurance policies available in the market, you need to decide on your priorities and then choose from the wide variety and select the plan you would like to invest in. Ideally, you should have 2 to 3 varieties of the most common types of insurance policies, as mentioned above.

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