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Benefits of Life Insurance

The life insurance plan offers various benefits to the policy buyer because it is considered one of the important financial products. It is the best way to build wealth and provide your family members with financial protection in your absence. Life insurance plans also give you different options to invest while taking care of your retirement requirements. While making a sound financial decision, you should check the importance of life insurance before you proceed to buy a plan. 

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What is a Life Insurance Plan?

A life insurance plan, also known as a life insurance policy, is a contract between the policyholder and the insurance company. The policyholder agrees to pay a regular premium to the insurer. In exchange, the company provides a lump sum payment, also called a death benefit, to the designated beneficiaries upon the policyholder's death. The beneficiaries can use the death benefit to help cover funeral costs, outstanding debts, and daily living expenses.

How Does Life Insurance Work?

For Example:

Rahul, a non-smoking male of 18 years age, with a yearly salaried income of Rs. 12 Lakhs, bought a term life insurance plan (a type of pure life insurance) to financially secure his loved ones. He compared the best term plans on Policybazaar and chose the one that best suits his preferences. He chose 1 Crore life cover for a 12-year policy term, and will now be paying Rs. 525/month for the next 12 years (until he turns 30) to keep his loved ones secured.

As we have understood life insurance meaning, let’s read on to learn more about benefits of life insurance policy: 

What Are The Different Types Of Life Insurance?

Here is a list of benefits of the different types of life insurance plans in India:  

  • Term Insurance:Term plans offer large life cover at affordable premiums and are the most simple type of life insurance. These plans offer a death benefit to the nominee on the death of the policyholder.

  • Whole Life Insurance: A whole life insurance policy covers you till 99 or 100 years of age. This allows you to live a peaceful life, knowing that your family will remain financially secure in your absence if anything happens to you.

  • ULIP Plans: ULIP plans offer death benefits as well as wealth creation benefits within the same plan. These plans provide a wide range of fund options for you to choose from as per your risk appetite.

  • Endowment Plan: These plans offer risk free savings and death benefits to the policyholder. Also known as money-back or traditional plans, the amount payable at maturity is fixed, and they often offer bonuses at the end of the policy term.

  • Savings Plans: Saving Plans offer combined benefits of insurance and investment. With these plans, you can financially secure your family and create a corpus to fulfil your goals. You can choose to receive the benefit amount as a lump sum or regular income.

  • Retirement/Pension Plans: These plans provide you with a regular income after the end of your monthly salary. With the pension plan, you can live a stress-free post-retirement life and fulfil your goals, like paying for your child’s wedding or higher education.

What are the 5 Benefits of Life Insurance Policy? 

Here is a list of 5 benefits of life insurance:

  1. Financial Security and Peace of Mind 

    Buying a life insurance policy offers financial security and peace of mind. This is because if the policyholder were to meet with any unfortunate event, they know that their loved ones will have a financial safety shield. Everyone has different financial liabilities, but sufficient life coverage makes sure that your debts/loans or your family members will be taken care of financially in case of your death. This is one of the important benefits of life insurance. 

  2. Wealth Creation

    Life insurance plans allow you to create wealth and build a corpus. Apart from life cover, you can also invest your premium amounts in multiple investment options based on your risk appetite. These plans are considered good wealth and corpus builders in the future.

  3. Tax Benefits

    Life insurance plans offer double tax savings benefits. The premium paid provides a tax deduction u/s 80C of the ITA, 1961. This simply means that up to 1.5 Lacs premium paid yearly is deducted from the gross income, reducing your tax outgo. Moreover, the maturity benefits of life insurance are tax-free, and this comes u/s 10(10D) of the ITA.

  4. Buy at Young Age and Save More

    Life insurance plans allow you to opt for low premium rates while you are young. If you purchase the same plan at an older age, you will be paying a much higher premium than if you purchased the same plan when you were younger.
    For example, an 18-year-old male buying an Rs, 1 Crore term insurance plan for 30 years of coverage will have to pay Rs. 525 per month. If they buy the same plan under the same conditions at 30 years of age, they will have to pay Rs. 923 per month.

  5. Maturity Benefits

    In case of the unfortunate death of the policyholder, the nominee/beneficiary of the policy receives the life cover amount till the time premiums have been paid completely. The amount i.e., the sum assured received from the term policy, can be used by the family for a number of reasons such as covering routine bills, paying back loans, children’s fees and others. If you want to buy term plan and still receive the maturity amount, you can opt for the term return of premium, which offers the entire premium amount at the end of the policy term.

How Can a Life Insurance Benefit Your Family?

A life insurance can benefit your family in the following ways:

  • Save for Child’s Future:With the increasing education costs and rising inflation, it is important to plan for the child’s future education. A life insurance plan provides a large sum to help them receive higher education in your absence.

  • Cover Against Illnesses: A life insurance can provide coverage against a variety of illnesses like terminal and critical illnesses. These can be added to the base plan at nominal premiums that offer an additional payout on the diagnosis of a critical illness or receive the accelerated sum assured on the diagnosis of a terminal illness.

  • Plan for Retirement: A life insurance plan can help you live a financially comfortable post-retirement life. You can use the regular income to fulfil your and your spouse’s needs after the end of your monthly income.

What are the Factors to Consider Before Buying Life Insurance Plans? 

Before buying the most suitable life insurance plan for yourself, here is a list of factors you should keep in mind to get the maximum benefits of life insurance:

  • Compare life insurance plans: You should always compare life insurance plans online to find the plan with the lowest premium rates. This ensures you get financial security and peace of mind without burning your pockets. You can also visit the Policybazaar website to compare from amongst 15+ insurers to buy the best life insurance or term insurance plans.

  • Flexible-Premium Payments: You should opt for a life insurance plan that offers flexible premium payment terms and frequencies. Most life insurance plans can be bought by paying the premiums in a single, regular, or limited premium payment term. You can also pay the premium at your convenience on a monthly, quarterly, semi-annual, or annual basis.

  • Long Policy Tenure: A long policy tenure ensures you are covered under life insurance benefits for longer. You can get a life insurance policy covering your needs for 5 to 40 years. Some plans like whole life insurance plan offer coverage for your whole life i.e., till 99 or 100 years of age, which means your family can get guaranteed benefits in case of your unfortunate demise.

  • Additional Riders: You can go through the list of riders offered under each plan and include the relevant riders to enhance life insurance coverage and benefits. These riders can payout in case of a critical illness, disability, or waiver of premium on the loss of a job and still allow you to continue the plan’s coverage even after claiming the rider benefit.

  • Claim Settlement Process: The Indian insurance regulation body IRDAI releases its annual report stating the claim settlement ratio (CSR) of all the Indian insurers. A company's CSR indicates an insurer's capability to settle your family’s future claims. You should always purchase a life insurance plan from a company with a CSR of at least 95%.

  • Policy Benefits: The policy benefits offered under each life insurance plan differs with different insurers and plans. You should go through the benefits of life insurance provided under each plan like the life stage, riders, bonuses, and more for an informed policy purchase.

How To Buy a Life Insurance Plan From Policybazaar?

You can buy a life insurance plan online in just a few minutes by following the below-mentioned steps:

  • Step 1: Go to the Life insurance page

  • Step 2: Enter your name, contact information, gender, and date of birth

  • Step 3: Give details about your smoking habits, occupation type, annual income, and educational background

  • Step 4: Choose the most suitable plan and proceed to pay using your preferred payment mode

**Benefits of life insurance may vary from insurer to insurer

Wrapping it Up!

As seen above, there are numerous benefits of life insurance that you can opt for by buying a life insurance plan in India. The most prominent benefits of life insurance are peace of mind/financial benefits, death benefits, maturity benefits, wealth creation, tax benefits, and rider coverage. You can also buy a life insurance policy and get comprehensive coverage at affordable premiums by comparing the most suitable plans online and buying the one that suits your needs and budget.

FAQs

  • Q: What is a Life Insurance policy?

    Ans: Life insurance is defined as an agreement between an insurance company and an insurance policyholder, where the company promises to pay money in return for a premium, in the case of the insured's death or after a specific period.
  • Q: What is the need for life insurance?

    Ans: The need for life insurance is that it offers a crucial financial safety net and brings peace of mind to your family in the event of your unforeseen absence. It plays a pivotal role in addressing outstanding debts, replacing lost income, and safeguarding your family's welfare. This makes it an indispensable component of prudent financial planning.
  • Q: Why is life insurance important?

    Ans: Life insurance is crucial because it provides financial security and support to your loved ones in case of your unexpected absence, helping cover expenses and maintain their quality of life. It offers peace of mind and ensures your family's well-being.
  • Q: What are the advantages of life insurance?

    Ans: Life insurance offers financial protection to your loved ones, ensuring their security and stability in your absence. It can cover various expenses, such as mortgages, education, and debts. Additionally, some policies provide investment and savings opportunities, further securing your family's future.
  • Q: What are the 10 benefits of life insurance?

    Ans: Below are the 10 benefits of life insurance:
    • Financial protection for your loved ones in case of your untimely demise.
    • Wealth creation and building corpus
    • Get coverage against critical and terminal illnesses
    • Cover against accidental disability during the policy term
    • Additional payout on the accidental death of the policyholder
    • Waiver of premium on disability or critical illness
    • Some plans offer hospital cash benefits
    • Tax-free death benefit and tax savings on premiums paid
    • Life cover helps cover funeral expenses and outstanding debts.
    • It serves as an income replacement, ensuring your family can maintain their lifestyle and meet future financial goals.
  • Q: How does life insurance benefit my family?

    Ans: There are various benefits of life insurance. Life insurance acts as a safety net for your family by providing financial support after your passing. The death benefit received by your beneficiaries can help cover immediate expenses such as funeral costs and outstanding debts. It also provides a long-term financial cushion, allowing your family to maintain their standard of living, pay for daily expenses, fund education for children, and even plan for retirement.
  • Q: What are the 3 things a life insurance can cover?

    Ans:The 3 things a life insurance can cover are:
    • Remaining debts and loans
    • Medical bills and other such expenses
    • Monthly rent and child’s fees
  • Q: What are the 6 types of life insurance plans available in India?

    Ans:The 6 types of life insurance plans available in India are:
    • Term insurance
    • Whole life policy
    • Savings plans
    • Retirement plans
    • Endowment plans
    • ULIP plans
  • Q: Who should buy life insurance in India?

    Ans: People who have dependents like parents, kids, or spouses should buy life insurance to ensure their financial stability in the event of their unfortunate demise. Business owners, self-employed and housewives should also buy life insurance to secure the future of thier loved ones, save on taxes, and pay off debts.
  • Q: Can life insurance be a good investment tool?

    Ans: Certain types of life insurance have a cash value component that can serve as a long-term investment tool, which is one of the benefits of life insurance. However, it's important to consider specific policies and consult a financial advisor.
  • Q: How does life insurance provide peace of mind?

    Ans: Among the benefits of life insurance, peace of mind is an important one because you will be relaxed knowing that your loved ones will be financially protected, even when you're not around.
  • Q: How many riders can I add to my life insurance policy?

    Ans: You have the flexibility to attach multiple riders to the base life insurance policy. However, it's crucial to keep in mind that the inclusion of each rider will lead to an increment in the premium rate.

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