Mother's Day: My mom never had insurance due to financial limits. What should I choose for her - life insurance, term insurance or ULIPs

I’m 28 and my mother is 56. She’s a single mother and has never had the financial means to invest in insurance. Now that I’m earning, I want to make sure her future is financially secure, especially in terms of healthcare and any emergencies. But I’m confused between life insurance, term insurance, and ULIPs. What do they mean, and what’s best for someone her age?

Advice by Satishwar B., MD & CEO, Bandhan Life

It’s admirable that you’re thinking ahead and wanting to secure your mother’s financial future. At age 56, the focus should ideally be on creating a reliable income stream and building a safety net for your mother. 

Understanding the basics

Let’s first look at the differences between life insurance, term insurance, savings plans, and ULIPs, and then explore what might suit her best.

Life Insurance:  When you buy life insurance, you agree to pay regular premiums, and in return, the insurer promises to give a lump sum amount to your family if something happens to you. This helps provide financial stability for your loved ones in your absence. Within life insurance, there are different kinds of policies, like term, savings, or unit-linked, which can be customised to suit your needs. 

●    Let me begin with savings insurance plans that offer guaranteed payouts either all at once at maturity or as a regular income. The payouts are guaranteed, and risk-free.
●    ULIPs (Unit Linked Insurance Plans) combine the benefits of market-linked returns along with life insurance. They help grow your money through market-linked funds and can provide higher returns over time, depending on market performance. 
●    Term Insurance offers a pure life cover. It pays a lump sum amount to the nominee if the policyholder passes away during the policy term. 

From the available options, savings plans can be an ideal option for your mother because they can help her save money and give life protection at the same time. ULIPs can be a good long-term option, only if your mother has a stable investment horizon and a moderate risk appetite. However, they are not the best solution for immediate income or security needs. As for term insurance - in your mother’s case it will be useful only if she still has any debts to payoff. Else, considering her age, a term plan will be expensive and may not offer much value, especially since her priority is to get regular income and healthcare support rather than just life cover.

What might work best for your mother?

At age 56, guaranteed returns are more important than chasing possible upside over the long term. Hence, a percentage of the money/savings should be used for creating guaranteed income, while some can be invested as an emergency fund for medical and other expenses.

Here are two options for you to consider for getting steady income:

1. You can go for a savings plan known as ‘Guaranteed Income Plan’

These plans provide regular, guaranteed income either immediately or after a short payment period.

●    Fixed Income: Some plans give monthly or annual income from the very first year.
●    Predictable Returns: The income amount is fixed, which gives peace of mind.
●    Flexible Planning: You can choose when the income starts—right away or after a few years.
●    Life Cover: Comes with life insurance coverage, so in case something happens, a lump sum amount is paid to the nominee.

This is a low-risk and dependable solution ideal for meeting monthly expenses or building a future fund for medical or living needs.

2. You can choose Retirement Plans or Annuity Plans to invest now and start getting income after a few years

If you're looking to create a longer-term retirement corpus, retirement plans or annuity products might be helpful. These let your investment grow over time and later convert it into a pension-like income.
 
●    Build Retirement Corpus: Money is invested in market-linked funds, which can grow steadily over time.
●    Lifelong Income: After a few years, you can convert the accumulated amount into monthly income (annuity) for your mother’s lifetime.
●    Tax Benefits: Contributions may qualify for tax deductions under prevailing tax laws.
●    Partial Withdrawals: Some plans allow partial withdrawals to meet emergency needs after a lock-in period.
●    Transparent and Low Charges: Many modern plans have minimal charges and offer loyalty additions for staying invested.

These work if you want to invest now and create a steady income in a few years from now. Remember that market-linked returns (even if you invest in debt funds) carry financial risk.

Which should you choose?

●    If your mother needs income right away or within a year or two, a guaranteed income plan is the most suitable. It’s simple, stable, and comes with a life cover.
●    If you are planning for the next five to 10 years and your mother doesn’t need the money immediately, you could consider an annuity plan to build a corpus and convert it into income later.

Bandhan Life offers a range of plans in both categories, and individuals can consult with advisors to find options that match their investment capacity.

Final Thoughts
You’ve taken the right first step. While the best time to buy life insurance was yesterday, today is still a great time to start. Whether it’s regular income, health expenses, or financial freedom for your mother—there are solutions to help you make it happen. Act now to secure her future.