What is Life Insurance? What does it mean?
A life insurance policy is a contract between an individual and an insurance provider, in which the insurance company pays the policyholder (the policyholder) a monthly fee/fees (called premium) Provides financial protection.
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Based on this arrangement, on the death of the policyholder or, if the policy matures, after some time, the insurance provider pays a lump sum amount to that person or his family. There are different types of life insurance policies in the market to suit the individual demands and needs of the policy buyer.
What Financial Goals can you secure with Life Insurance?
Life insurance plans help to meet various financial objectives of an individual and his family. Some of the goals of an individual that life insurance policies help in fulfilling are:
- Financial protection in case of death
- Education for Children
- marriage of children
- buying/owning a house
- Pension or regular income after retirement (income)
With the help of life insurance plans, you can achieve certain financial goals. Life insurance plans are quite versatile. You can plan for your defined life goals and incorporate (align) your insurance to help you achieve them, for example, drawn from an endowment plan (traditional or market linked) You can use the corpus (large amount) to pay for a house in the future.
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What are the different types of Life Insurance?
Now you should know about the major types of life insurance plans:
- Term Life Insurance Plan – Pure Risk Cover
- Unit Linked Insurance Plan (ULIP/ULIP) – Investment Opportunity (Opportunities) along with Insurance
- Endowment Plan – Insurance and Savings
- Money Back – Periodic Returns with Insurance (Returns from time to time)
- Whole Life Insurance – Whole Life Coverage for Life Assured / Whole Life Coverage for Life Assured
- Child plan – Life goals for children like education and marriage
- Retirement (Retirement) Plan – Income After Retirement (Income)
Understand the specifics of each life insurance plan.
1. Term Life Insurance Plans
Term life is the purest form (pure type) of insurance plans. It provides you life cover without any saving or profit element(s). Term life insurance plan is the most economical type of life insurance as its premiums are much cheaper as compared to other life insurance plans. This is the purest form (pure type) of life insurance.
2. Unit Linked Insurance Plan (ULIP/ULIP)
A unit linked insurance plan is a perfect amalgamation of investment and insurance. A portion of the premium paid for a ULIP plan is used as a risk (insurance) cover and a portion is invested in various funds.
Depending on the risk tolerance of the policyholder, they can invest in various funds offered by the insurance provider. The insurance providers then invest the collected amount in various money market instruments like shares and equities.
3. Endowment Plan
Endowment plan is a traditional life insurance policy which is a combination of insurance and savings.
In an endowment plan, if the life assured i.e. the life assured lives beyond the policy term, then the insurance company provides maturity benefit to the policyholder. Also some endowment plans may offer periodic bonus which is paid either on maturity or in case of untimely death of the policyholder.
4. Money-Back
Money Back Life Insurance Plan is a unique type of life insurance policy in which a portion of the Sum Assured (Sum Assured) is paid directly to the insured (insured) at regular intervals as a survival benefit. In this way the policyholder can achieve short term financial objectives.
5. Whole Life Insurance
Whole life insurance plans cover the life assured (insured) for the whole life, or in some cases till the age of 100 years.
At the time of buying a whole life insurance plan, the sum assured is determined. A nominee is mentioned at the time of purchase. Death claim and bonus, if applicable, is paid to them in case of any unfortunate event.
However, if the life assured (insured) survives more than 100 years, the insurance provider pays the life insured a maturity benefit equal to the endowment corpus (amount).
6. Child Plan
The goal of a child life insurance plan is to build an accumulation (amount) for the future development of the child. Usually it helps in providing money for the education and marriage of a child.
This type of plan provides installments annually or pays a lump sum amount after major milestones of a child’s life. If the insured parent dies during the policy term (term) – all future premiums are waived off and the policy benefits continue uninterrupted.
7. Retirement Plans
Retirement life insurance plan helps in building a stable financial source for the retirement years of an individual. It makes a person financially independent and helps them to live without any worries. Most retirement life insurance plans offer an annual payout (in the form of annuity/annuity) or one-time lump sum payout (by way of commutation/conversion of the amount accumulated up to the prescribed limit/prescribed limit) on completion of 60 years.
What are the benefits of a life insurance plan?
The 3 major advantages of a life insurance policy are as follows:
1. Security
Life is unpredictable and can be full of uncertainties. It is difficult to overestimate the possibility of an unfortunate event like death. In such situations, the family has to face financial troubles due to lack of a consistent income (income).
Investing in a life insurance policy from the very beginning in life acts as a safety net in case of such a possible eventuality. The Life Insurance Provider is bound to pay a pre-determined Sum Assured (Sum Assured) to the nominee (nominee) or beneficiary (beneficiary). As a result, the family remains safe even when the policyholder is not there.
2. Long Term Savings
If one wants to make long term investment then it is important to consider about life insurance. These types of insurance plans help you to make systematic savings and build up a corpus which can be used for various reasons like building a new house, good education for your child and wedding expenses of the child. Providing funds for
Not only this, some life insurance policies offer monthly payouts in the form of annuity which is an ideal way to aim and achieve retirement goals.
3. Investment Options / Investment Options
Life insurance providers offer Unit Linked Insurance Plans (ULIPs) which are primarily a means of investment.
These market-linked life insurance products provide significant returns across maturity, hence making this ULIP a reliable investment tool.
How to choose the right life insurance policy?
Once you have understood what life insurance is and have identified the need for life insurance, you should go through these simple steps to choose the best life insurance policy. Choose the best life insurance plan available with these steps:
1. Contact Insurance Consultant / Provider
Even though it may not seem important at the initial stage, it is very important to engage a reliable and knowledgeable insurance advisor or provider while taking life insurance. Many people are unable to make decisions on their own and require the expertise of an insurance advisor.
Insurance industry customers are more inclined towards digital media but still expect conversations and recommendations [2] for such important activities.
2. Evaluate Life Insurance Cover
A life insurance provider can help you calculate the life cover amount (Sum Assured/Sum Assured). They calculate the preferred life cover by assessing your source of income, number of dependents/dependents, any liabilities/liabilities and your expenses.
Life insurance providers also help in choosing the best insurance from the different types of life insurance plans available in the market. This ensures that you get an optimum life cover. Additionally, you can check your life insurance needs with our online calculator.
3. Compare Life Insurance Plans
There are many insurance providers in the market that offer different types of life insurance policies. You need to make sure that you carefully choose the life insurance that is most suitable for you from the available options. You must compare different life insurance plans to avail the best life insurance policy available as per your financial needs.
For this, one can choose the most suitable plan by comparing the life insurance plans of different insurers considering all the requirements and criteria.
Insure to stay safe
Buying a life insurance policy is a necessity of our times. While many people buy different types of life insurance plans, not everyone is aware of the many benefits it offers. In your absence, a life insurance policy helps and financially support your family in difficult times.
Not only this, investing in a life insurance policy encourages a disciplined habit of saving. In this way it enables any individual to build up a significant corpus.
