Life Insurance
What is Life Insurance?
A life insurance policy is something that provides a dedicated sum of money on the demise of the policyholder or after a certain period of time.
Life insurance is a contract wherein an individual is offered financial coverage by an insurance company in exchange for a payment over a period. The payment made to the insurer is referred to as the premium. In case the policyholder passes away during the policy tenure, the insurance company will offer a lump sum amount to his/her nominee. This lump sum amount is called the sum assured on death or the death benefit. Upon completion of the policy term, the policyholder receives a sum assured on maturity or the maturity benefit from the insurer along with some bonuses.
Premiums paid and benefits received under life insurance are liable to tax benefits under Section 80C and Section 10(10D) respectively of the Income Tax Act, 1961.
Types of Life Insurance
- Term Life Insurance: Term life insurance is a type of life insurance that provides a death benefit to the beneficiary only if the insured dies during a specified period. If the policyholder survives until the end of the period, or term, the insurance coverage ceases without value and a payout or death claim cannot be made.
- Whole Life Insurance: Whole life insurance is an insurance plan that provides you coverage throughout your lifetime provided the policy is in force. Whole life insurance policies also contain a cash value component that increases over time.
- Endowment Policy: An endowment policy is defined as a types of life insurance policies that is payable to the insured if he/she is still living on the policy's maturity date, or to a beneficiary otherwise. Endowment life insurance plans provide you with a dual combination of protection and savings.
- Savings & Investment Plans: Savings & Investment Plans are the types of insurance plans that provide you the assurance of lump sum funds for you and your family's future expenses. While providing an excellent savings tool for your short term and long term financial goals, these plans also assure your family a certain sum by way of an insurance cover. This is a broad categorization that covers both the traditional and unit linked plans.
- Pension Plans: These plans provide you with income during retirement is called the Retirement Plan. These plans are offered by life insurance companies in India and help you to build a retirement corpus.
- Unit Linked Insurance Plans - ULIPs LIPs are a type of life insurance plan that provide you with a dual advantage of protection and flexibility in investment. It is a type of life insurance where the cash value of a policy varies according to the current net asset value of the underlying investment assets. The premium paid by ULIPs is used to purchase units in investment assets chosen by the policyholder.
Benefits of Life Insurance
- Risk Cover: Since uncertainties are unpredictable and may cause problems to an individual and his/her family at any time, availing a life insurance policy will ensure that your family and dependents continue their lifestyle in case of your unforeseen and accidental death.
- Comprehensive Plan for Different Stages of Life: Not only does life insurance offer financial support in case of the policyholders unforeseen and accidental death, but also serves as a long-term investment in the sense that it encourages you to lay down your objectives, such as traditional endowment plans, provide specific maturity benefits and built-in guarantees via a number of product options like Guaranteed Maturity Values, Guaranteed Cash Values, Money Back, etc.
- FACILITY OF LOANS WITHOUT AFFECTING THE POLICY BENEFITS: One can opt for loans against their policy. This can be done without affecting the policy and its terms and conditions at all. This ensures that you can easily meet the sudden and unexpected events in your life.
- Guaranteed Income via Annuities: Savings & Investment Plans are the types of insurance plans that provide you the assurance of lump sum funds for you and your family's future expenses. While providing an excellent savings tool for your short term and long term financial goals, these plans also assure your family a certain sum by way of an insurance cover. This is a broad categorization that covers both the traditional and unit linked plans.
