What is Life Insurance?
“Life is what happens when you’re busy making other plans,” John Lennon once said. A lot of things that happen in life are unexpected. However, you go about your life and end up finding yourself in unexpected situations. But what if you were told there was a way to deal with some of them?
It can be terrifying to imagine a life for your loved ones without you in the picture. You would want to give your family the best things in life, and financial security is at the top of that list. Planning your future by investing in life insurance can help you do so.
What is Life Insurance?
Life Insurance is a legal contract for life coverage between the insured and the insurance provider. Life insurance provides a death benefit, the sum that will be paid to the nominee if the policyholder passes away given unfortunate circumstances. Some types of life insurance policies also come with a survival benefit, wherein if the policyholder survives the policy term, they receive the maturity benefit that was promised to them in the beginning.
Life insurance also offers some additional coverages. The policyholder can avail these offers to cover critical or terminal illnesses or cover for emergencies related to accidents. To receive these benefits the policyholder has to pay premiums decided on while purchasing the life insurance. After the term ends, the beneficiary is eligible to receive the guaranteed lump sum amount.
How Does Life Insurance Help You?
People who want to secure their family’s financial future should consider purchasing life insurance. It greatly benefits the beneficiary because it is a legal contract that binds the insurer to pay at the end of the term. If you buy life insurance, you will have to make regular premium payments based on the term plan you choose.
Benefits of Life Insurance
- Security of your Family’s future: The future security of your family without you is a sombre subject. Everyone recognizes how difficult it is to cope with the loss of a loved one while also worrying about one’s finances. Purchasing a life insurance policy will ensure that your family receives income even if you are no longer present to provide for them.
- Comes Bearing Tax benefits: Under Section 80C and Section 80D, tax benefits can be claimed on term insurance premiums paid. Under the terms of the policy, the assured sum, or lump sum payout is tax-exempt and is subject to Section 10 (10D) of the Income Tax Act.
- Assists you in Living a Stress-free Life: You can rest easy knowing that your family’s financial future is secure and that they can continue to live comfortably in your absence. For now, you can spend time with them without worrying about the future.
- Aids in the Achievement of Financial Goals: Everyone has dreams and financial goals they want to achieve. Purchasing a life insurance policy will help your family with this. Imagine putting aside a small amount of money each month and eventually winding up with a large fund; wouldn’t one’s dreams come true?
Types of Life Insurance Policy
Insurance companies provide different types of life insurance policies. Let us have a look at some of them –
Term Insurance policy: This type of life insurance provides a death benefit to the beneficiary, which means that in the event of their demise, the chosen plan’s sum assured is paid to the nominee.
Unit Linked Insurance Plan: In 1971, the Unit Trust of India (UTI) introduced the nation’s first ULIP. Unit Linked Insurance Plans or ULIP are greatly preferred because of their transparency in investment. It also offers a dual benefit of investment and insurance to the investors. Thus, providing the investors more advantages in a single pension plan.
Endowment Insurance Plans: Endowment insurance plans help ensure sustained formation of wealth overtime. This is an excellent way of saving under a life insurance policy. The policyholder will be given the assured sum on the maturity of the policy. Also, if the policyholder passes away due to unfortunate events, the lumpsum amount will be transferred to the nominee of the insurance policy.
Life insurance policies are an important financial tool when it comes to securing your family’s financial future after you are gone. Now that you know almost everything about life insurance, you will be able to take wise financial decisions.