Features of Life Insurance Plans

What is a Life Insurance Policy?

Life insurance is a contract between you and an insurance company where you pay regular premiums. In return, the insurer promises to provide a lump sum (the sum assured) to your nominee in case of your death during the policy term. Depending on the plan type, it may also offer survival or maturity benefits if you live through the policy duration.

In simpler terms, it's a tool that ensures your loved ones remain financially secure even if life takes an unexpected turn. Broadly, life insurance plans can be categorized into two simple types:

• Term Insurance Plans - Term life insurance plans are pure-protection plans that offer a death benefit in the form of a lump sum payment to your family/nominee in your absence at affordable premium rates. 

• Savings Plan - These plans provide a guaranteed payout at regular intervals to help you meet your financial goals, such as buying a house or paying for your child's higher education, while also offering life insurance benefits.

*Note: You can also learn about life insurance in Hindi.

Characteristics & Key Features of Life Insurance Plans

Below are some of the key characteristics of a life insurance policy:

• Death Benefit
  The lump sum amount paid to the nominee if the life assured dies during the policy term. 

• Premium Payment
  Every life insurance plan requires you to pay a fixed amount, known as the premium. The cost depends on factors like coverage amount, policy term, age, and the chosen riders. You can pay it monthly, quarterly, half-yearly, or annually, depending on what fits your budget and convenience.

• Policy Term
  This is the duration for which your policy remains active. During this period, the insurer provides financial protection to your family. Choosing the right term ensures coverage aligns with your financial milestones, such as your child's education or home loan repayment.

• Sum Assured
  The sum assured is the guaranteed amount your family receives if something happens to you during the policy term. It's the core of your life insurance plan, ensuring financial stability for your dependents.

• Maturity Benefits
  If your policy includes a savings component and you outlive the term, you receive a lump sum payout. This maturity benefit can help fund future goals such as retirement, higher education, or starting a business.

• Investment Components: Certain plans like ULIPs (Unit Linked Insurance Plans) combine investment with insurance, allowing for creating wealth over time. 

• Claim Settlement
  A quick and transparent claim process ensures your nominee receives the policy benefits without delay. Checking a company’s claim settlement ratio before buying helps gauge reliability and ease of payout.

• Riders (Add-on Covers)
  Add-on Riders for Enhanced Coverage: Insurance companies offer optional riders or add-ons to enhance basic life coverage at a nominal extra cost. Common riders include:

  • Accidental Death Benefit

  • Critical Illness Cover

  • Waiver of Premium

  • Income Benefit Rider

  Adding riders can customize the plan to suit specific needs, like health protection or income continuity during illness or disability.

• Nominee Assignment
  The nominee is the person you choose to receive the policy payout. Most insurers allow you to update this nomination at any time to reflect changes in your family circumstances.

• Loan Facility
  Some plans allow the policyholder to borrow money against the accumulated cash value of the plan, generally at a lower interest rate than a personal loan. 

Benefits of Life Insurance: Why It Matters

• Financial Security for Your Family
  The most significant advantage of life insurance is the peace of mind it provides. It ensures your family's financial needs, from daily expenses to long-term obligations, are taken care of, even when you're not around.

• Wealth Creation Opportunities
  Plans like ULIPs combine protection with market-linked investments. They help you grow wealth while keeping your family financially protected, making them ideal for long-term goals.

• Support for Retirement Planning
  Endowment and whole life policies can provide steady returns over time, helping you build a financial cushion for retirement while keeping your dependents insured.

• Tax Savings
  Life insurance policies offer multiple tax advantages:

  • Under Section 80C, premiums paid up to ₹1.5 lakh annually are eligible for deductions.

  • Under Section 10(10D), the death and maturity benefits are tax-free, subject to certain conditions.

Why Should Life Insurance Be A Part of Your Financial Planning? 

Life insurance is more than a safety net. It forms the backbone of long-term financial stability and keeps your goals protected even when life takes an unexpected turn.

• Debt Repayment
  Life insurance proceeds can be used to pay off existing loans, such as home or car loans, credit card bills, or personal debt. This helps prevent your family from taking on additional financial pressure.

• Covering Final Expenses
  Funeral, medical, and legal expenses can create sudden costs. Life insurance provides the funds needed to handle these expenses and gives your family immediate financial relief.

• Wealth Transfer and Estate Planning
  A life insurance policy allows you to pass on wealth in a tax-efficient way. Since the payout is generally tax-free, it helps your beneficiaries receive a secure inheritance and reduces estate tax liabilities.

• Supporting Long-Term Goals
  Life insurance helps your financial goals stay on course, even when you are not around. It can fund your child's higher education, contribute to a home purchase, or provide retirement support for your spouse.

• Peace of Mind
  Having a life insurance policy brings emotional security. You can focus on your present knowing that your loved ones will remain financially stable no matter what happens.

How To Buy Life Insurance Plans From Policybazaar?

Now that you have understood what the characteristics of life insurance are, you can follow these steps to purchase a life insurance policy from Policybazaar:

• Step 1: Visit Policybazaar’s website and click on Life Insurance.

• Step 2: Select the type of life insurance plan you want to purchase i.e., term plan or investment plan.

• Step 3: Fill in your basic details like name, date of birth, contact number, and gender.

• Step 4: Answer the questions regarding your smoking and chewing tobacco habits, your annual income, occupation type, and qualifications.

• Step 5: Select the life insurance policy most suitable for you and proceed to pay.

Final Thoughts

Before buying life insurance it is important to understand the characteristics of life insurance plans to make the most of your plans. You can go through the characteristics of term insurance listed above before purchasing the life insurance policy best suited to you as per your requirements from Policybazaar’s official page.

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