What is Life Insurance and How does it work?
Life insurance is a contract between an insurance company and an insured person. Accordingly, if there is an accident of the insured person, in which he dies,
Then the insurance company pays a certain amount to the nominee person. The insurance company has to make a regular payment of a small amount as a premium for a limited time.
The insurance policy provides the financial protection of your family after your leave.
Apart from the financial security of the family, the insurance helps the policyholders in saving tax under section 80C and 10 (10D) of the Income Tax Act, 1961.
Besides that financial security and tax benefits, a life insurance policy offers many additional benefits, which we will discuss in detail.
Types of Life Insurance Policies in India
Life insurance provides various types of insurance plan, that we will discuss types of life insurance policies and their benifit in india in detail below.
1. Whole Life Insurance policy
The whole life insurance policy provides protection for your whole life. in this plan, the company provides the option to pay the premium amount at a specific time, as you know the maturity period.
2. Term insurance policy
in this plan, the insurance amount is given to the particular nominee or beneficiary after the death of an insured person, which is mentions on the policy document.
so if you want to only buy life risk cover, then term insurance is the best and cheapest option for you.
3. Child Insurance Policy (Insurance Policy for Children)
The child insurance policy specifically provides financial coverage for the future of the child. It is basically a combination of insurance cover and an investment plan that secures your child’s future at every stage.
Basically, a child insurance policy ensures that the future financial needs of your child are taken care of even in your absence.
This life insurance policy provides you a lump sum amount at the end of the policy. this policy offers payment options at important stages of your child’s life.
4. Endowment insurance plan
The endowment policy pays you the option with both investment and death benefits. The plan charges a high premium which is invested in the asset market – debt and equity.
The endowment policy provides a lumsum amount at the maturity period and the maturity range up to a certain age of 10, 15 or 20 years.
some of the plans also pay the amount in the case of critical illness.
5. Pension plan
This plan helps you to financially secure your retirement life. there are many pension plans available in the market, but these are different.
This pension plan comes with both an investment or savings option that meets future retirement requirements. under this plan, the insured person gets the regular income as an annuity during your retirement days.
6. Money Back Plan
Money-back plans are the same as endowment plans but the difference only the return can be withdrawn during the payment period.
In this plan, some part is returned to the insured person from time to time according to the policy tenure. It also includes a bonus, in the case of death full insurance amount will be paid.
For these additional features, the premium of this plan is higher
7. Investment Plan
This policy also helps you to save your money and get insurance protection. Due to lifestyle improvements, growing concern, better and better living aspirations and people have to think about investing money to secure their future.
Securing all your financial goals with an existing investment plan. it is true that every people has different needs, so the investment plan is not to be suited for everyone’s needs.
8. Unit-Linked Insurance Plan (ULIP)
The Unit linked insurance plans offer you the option to choose the best way to invest your money. that you can also invest your money in debt and equity.
But if you want to switch to the current investment method, then you can easily do that. ULIP is the financial tool that provides insurance cover and also helps in wealth creation.
If you have a piece of good knowledge of the stock market, then it will easy for you.
5 Benefits of Life Insurance
Why should you buy a life insurance policy and what are its benefits? No one can tell what’s going to happening in the future.
Leaving at any time in life can cause big problems for your family. In that case, an insurance policy will get your family out of financial trouble.
Therefore, buying a life insurance policy will assure that your family will Be able to live life easily after you. also they can maintain their standard life in any week situation.
The life insurance policy provides many benefits to the policy holders then they will get.
so the benifit of the life insurance are following:
1. Accident Cover
After an accident, the recovery cost is so high and a general insurance policy does not support as they need.
But a life insurance policy is able to do this, its goal is to meet the needs that we think to reduce. Any person may face an accident in which he or she may have some neglect.
2. Financial Assistance – Death Benefit
Every person needs insurance to cover his repay, expenses, debt, maintain their children education and family expense. but in the case of death, it will perform like a guardian.
When a person leaves then his family has to face a lot of problems including money, At this time, life insurance works like an assistant and contributes to meet their needs.
3. Loan Facility
There also have the facility of the loan, where people avail a loan through their insurance policy.
which can help them to fulfill their desire without working out the assured benefits on the policy purchased.
4. Assured income
there have some schemes that you can get benefit in saving money after retirement.
You save money within a certain period of time that you will get as a fixed income at the time of retirement.
5. Tax Benefites
Life insurance offers an attractive tax benefit that will help you to make more money. Most of the life insurance policy provides the benefit of a tax deduction on payment of under section 80C of Income Tax Act, 1961,
And section 10 (10) D also provides the tax-free amount to the policyholders.
So insurance is a very important part of a financial assistant. you can buy a life insurance policy that financially protects you from future losses, damages and death.
It also helps to financially secure the life of your family after your death. in this article, we discuss various types of life insurance and their benefits for a person. you can purchase any policy according to your requirement.