All You Need to Know About Life Insurance

Life insurance providers offer individual financial coverage in exchange for the premium amount they pay regularly. In the event of the insured incident, the insurance company pays the beneficiary of the policy the sum assured to help them tide over financial obligations and expenses in the absence of the policyholder. Hence, the life insurance policy serves as a binding contract between the policy buyer and the insurance company. 

It acts as a financial security and helps individuals’ families to account for their living expenses and existing obligations with ease even in their absence. Based on one’s needs and requirements, and personal goals, individuals have the option to pick the best-suited life insurance policies.

Top Perks of A Life Insurance Policy

These are the top features and benefits of an insurance policy that makes it such a viable plan for financial planning.

Life protection

Life insurance policy extends comprehensive financial protection to the policy buyer and their nominees in the event of the insured’s untimely death. The plan can also help them to cover major health expenses, such as hospitalization charges and critical illness coverage.

Different insurance plans for different needs

Leading insurance providers offer a range of insurance policies to help individuals meet their unique needs. It is recommended that policyholders choose an insurance plan that fits their financial capacity and offers desired coverage.

Guaranteed payment

Life insurance offers individuals a guaranteed amount, or sum assured, to the beneficiary if the policyholder passes away. This payment helps the beneficiary of the policy to pay off existing debt and account for major expenses in the future without exhausting their personal savings or taking out additional loans.

Loan facility

Many life insurance plans enable policyholders to avail of a loan against their paid premium. This feature can be useful for those who need to access cash quickly during an emergency.

Tax benefits

Life insurance premiums are deemed eligible for tax deductions under the provisions of Section 80C of the Income Tax Act, of 1961. This means that the insured can lower their taxable income by paying their life insurance premiums.

Build a corpus

A life insurance policy can be considered a long-term and the best saving plan in India  that helps individuals build a corpus of money. The policyholder can access their saved corpus at the end of the plan’s maturity period or term as a survival benefit, or their nominee can avail of it if they pass away.

Individuals can opt for a life insurance plan to help achieve their financial goals, based on their specific needs and timely requirements.

Types of Life Insurance Policy Plans

These are the popular types of life insurance policy plans –

Term insurance

Term insurance plans extend life insurance coverage to the policy buyer for a specific period which can be 10, 15, or 20 years. These plans do not have any cash value, making them relatively inexpensive than other insurance. However, individuals must compare different term insurance policies before picking one to ensure they are getting what’s best for their financial needs.

Endowment plans

Endowment plans offer both life insurance coverage and a savings component. If the policyholder survives until the end of the policy term, they will receive a lump sum payment. Endowment plans are more expensive than term insurance plans, but they offer additional benefits.

Unit-linked insurance plans

Unit-linked insurance plans combine the perks of life insurance coverage with lucrative investment opportunities. The policy buyer can choose to park a part of their insurance premiums in various funds, such as debt funds, equity funds, or hybrid funds. Usually, ULIPs are known for offering higher returns than other life insurance policies. However, ULIP comes with substantial risks thanks to its investment component.

Whole life insurance

This life insurance extends coverage for the entire life. It provides the insured with a survival benefit, which is paid to them if they outlive the policy term. Policyholders are also allowed to withdraw partially from the promised sum assured and borrow against it.

Annuity or pension plan

An annuity is basically a financial product that offers the policyholder with guaranteed income payments for their life. Policyholders pay a fixed premium, which is invested and saved over time. The insured then avails of regular payments, either as a lump sum or an annuity, based on their preference.

Money-back policies

Money-back policies provide the insured with insurance coverage along with survival benefits, which are paid at regular intervals throughout the ongoing policy term. This insurance policy is similar to endowment plans but offers more flexibility. This is because policyholders are allowed to withdraw money from the savings component of the ULIPs before the end of the insurance policy term.

What Should You Check When Getting a Life Insurance?

When looking for a life insurance policy in India –

  • Read the policy terms and conditions
  • Check the policy term period or lock-in period
  • Check premium payment options
  • Find out the list of coverage and exclusions
  • Check the claim settlement ratio

Besides these, individuals should also check out the claim settlement process followed by the insurance policy provider to ensure that you or your family experiences smooth processing and timely assistance. In case of sudden death of the insured event, their nominee can file an insurance claim with the insurance provider. However, to do this they need to file a claim form detailing the cause time, and place of death and the cause of death. After all the required documents are submitted, the insurer may ask for additional details or documentation. Subsequently, the claim gets verified and settled. However, the approval of the claim depends on how transparent the insured or claimant has been about their medical or personal history and or about the cause of death. This is because any misinformation or gap in information can lead to claim rejection, denying the beneficiary’s access to the sum assured. Additionally, before availing of a life insurance policy is it important to check the list of exclusions carefully and ensure the same does not emerge as a barrier for them.

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