What is life insurance?
Advantages of life insurance plan:
If you wonder what life insurance means, You should know that a life insurance policy is an individual And an agreement between an insurance provider, So that the insurance company provides financial protection to the policyholder in exchange for monthly or annual fee (known as premium). Important Before Buying Your Life Insurance, Understanding the definition, types, benefits and features of life insurance.
According to the definition of life insurance, The insurer (insurance company) provides an insurance to the policyholder or nominee, If the policyholder dies untimely in exchange for premium payment for life insurance policy! For him his family or nominee is a sure sign
Gets. Based on the agreement, In case of death of the policyholder or, when the policy matures, the insurer Or pays his family a single amount after a certain period of time.
What is life insurance premium?
Simply put, “life insurance premium” means you pay your life insurance company for your coverage. Life insurance premium can be regular monthly / annual payment or lump sum payment. Payment (also called Death Benefit) is if you die unexpectedly during the term. However, the life insurance company will pay your beneficiaries.
What are the different types of life insurance?
Now that you are aware of the meaning of life insurance and the definition of life insurance, Here are some key types of life insurance plans:
Traditional life insurance:
Traditional life insurance plans offer multiple benefits in terms of life cover and returns,
Provides security and safety to insurers. These policies are considered risk-free. This is because they provide a cover amount in case of death of the insured or at the end of the term.
There are three types of this life insurance plan:
1. Term Life Insurance:
Term life insurance plans are basically risk free, Low cost and generally considered the highest coverage. These plans are purchased for a specific period of time (e.g. 10 years or 20 years). This plan pays a fixed payment in case of death of the insured or at the end of the term. Term life insurance plans are the purest form of life insurance, Because they provide life cover without any savings or profit factor.
2. Endowment Plan or Guaranteed Return Plan:
Endowment plans provide financial protection through life cover with guaranteed returns.
If the policyholder survives till the maturity date of the policy, Then he will get a bunch of money once. The amount of life cover is much less with this plan And people usually buy these plans for the sake of maturity. These plans are great if you save for big purchases.
3. Money back policy:
In a money back policy, the customer receives a fixed percentage of the guaranteed amount for a guaranteed payment over a period of time. In short, a money back plan is an endowment plan with liquidity. In this way, the policyholder can achieve short-term financial goals.
Market Linked Life Insurance (ULIPs):
ULIPs (Unit Linked Insurance Plans) offer the individual both protection and savings with flexibility. Since these products are associated with the stock market, They are more likely to give better returns than traditional life insurance plans. There is a risk of low returns with high returns, Which will depend on market performance. The risk of the policyholder depends on the tolerance, They can invest in various funds provided by the insurer. The insurer then invests the collected amount in various shares and equities.
What are the benefits of a life insurance plan?
Once you understand the meaning of life insurance and understand the different types of life insurance policies, Let us know what are the 4 main benefits of getting the best life insurance policy and what it is.
1. Financial security: Life can be unpredictable and full of uncertainty. It is difficult to reduce the chances of an unfortunate event like death. In such a situation, the family faces financial crisis arising from lack of fixed income. Invest in the best life insurance policy early in life, Acts as a safety blanket during such events. According to the definition of life insurance, the insurer is obliged to pay a pre-determined sum assured to the nominee or beneficiary. As a result, his family is protected even in the absence of a policyholder.
2. Long-term savings: If one wants to make long-term investments, Then it is important to think about the meaning of life insurance. These types of insurance plans allow you to make systematic savings And helps create a corpus, Which can be used for a variety of reasons, Such as building a new home, Going to a quality school for your child And to finance the marriage expenses of a child.
3. Investment Options: Understanding the meaning of life insurance in your financial context will allow you to plan your investment efficiently. Life Insurance Providers Offer Unit-Linked Investment Plans (ULIPs), Which is basically a market connected return And investment instruments based on life insurance, This means you can get dual benefits through a single financial product. These market-linked life insurance plans offer significant benefits at maturity, They therefore make ULIP a reliable investment tool.
4. Tax benefits: There are income tax benefits on life insurance under sections 80C and 10D of the Income Tax Act. Under section 80C, you pay premium for a life insurance policy, Which qualifies for a discount of up to $ 1.5 lakh, When Section 10 (10D) exempts income on maturity, If the premium is not more than 10% of the sum insured, Or at least 10 times the insurance premium.
