Features of Life Insurance Plans

What is a Life Insurance Policy?

Life insurance plans help secure your family financially, in case of your unfortunate death. All you have to do is pay your premiums for the policy term and during that tenure, if you suffer an unfortunate death, your family will receive the sum assured selected at the time of policy purchase. 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. Term plans are the most efficient and affordable forms of life insurance policies and offer high life cover in low premium rates.
  For example, Mrs. Pooja, a 33 year old non-smoking female, with annual income of 14 Lakhs, purchased a term plan of Rs. 1 Crore for her family’s financial security, so that when she dies, the family/nominees will get the claim amount after her death.

• Savings Plan - These plans provide a guaranteed payout at regular intervals to meet your financial goals such as buying a house or paying for your child’s higher education while providing life-cover benefits.
  For example, you wish to have a source of wealth creation after your retirement. In this case, savings plans are a great help, as they not just secure you financially, but also make sure you have a mode of saving money. ULIP is one such savings plan available in India that provides the dual benefit of wealth creation and life cover.

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

What Are The Features Of Life Insurance?

Here is a list of some characteristics of life insurance. Let’s discuss in detail:

• Financial Protection for Dependents: The most fundamental characteristic of a life insurance plan is its role in providing financial protection. In the event of the policyholder's death during the policy term, the insurer pays a death benefit to the nominee or beneficiary. This lump sum can help dependents manage home loans, education, daily living costs, and future goals.

• Premium Payment: Life insurance plans offer flexibility in premium payments. Depending on your income and financial planning, you can choose from:

  • Regular Pay: Premiums are paid at regular intervals (monthly, quarterly, annually).

  • Limited Pay: Pay premiums for a shorter duration while enjoying coverage for a longer period.

  • Single Pay: A one-time lump sum premium is paid for the entire policy duration.

   

  This flexibility allows policyholders to match payments with their financial capacity.

• Wealth Creation: Unit linked insurance plans are one of the best options for investment for creating wealth. In this, a part of the premium payments will be invested in equities, and the insurer will pay dividends of the policy every year based on income generated via investments. The remaining premiums paid will be used for life insurance coverage. This is a combination of investment and insurance that helps preserve health and provide financial security to your loved ones.
  Child Plans and Pension Plans: Tailored to secure a child’s future or post-retirement income.
  Understanding these types helps you select a plan aligned with your goals.

• Policy Term: The policy term is the duration for which the insurance cover is provided. Term plans generally offer coverage from 10 to 40 years or even till age 99 in some cases. Whole life plans provide coverage until the policyholder’s death, irrespective of when it occurs. The sum assured, or the guaranteed amount payable on death, is chosen at policy purchase. It directly influences the premium payable and should be selected based on financial needs, liabilities, and future obligations. 

• Maturity Benefits: Some life insurance policies offer maturity benefits if the insured survives the policy term. Endowment plans, ULIPs, and money-back policies typically fall into this category. These benefits are either guaranteed returns or based on the performance of underlying investments in case of market-linked plans. Survival benefits in money-back plans are paid at specific intervals during the policy term, providing liquidity for planned expenses.

• 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.

• Loan Facility and Surrender Value: Certain life insurance policies, like endowment or whole life plans, acquire a surrender value after a few years. This means you can surrender the policy and receive a portion of the premium paid, though this amount is often lower than the total premiums. Also, loan facilities can be availed against policies that have a cash value, offering financial support in emergencies without breaking the policy.

• Claim Settlement: Claim settlement is the process by which the insurance company gives the plan benefits to the nominee/beneficiary in the event of the policyholder’s unforeseen absence. A smooth claim settlement process is essential to ensure financial support for the nominees/beneficiaries in a regular manner.

• Nominee: The nominee is an individual who receives the sum assured amount of the life insurance plan. The policyholder may choose to update the nominee according to their increasing personal relationships.

• Tax Benefits: 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.

These life insurance tax benefits make life insurance a preferred tax-saving and financial security choice.

*Note: Before buying term insurance, it is advisable to understand what term insurance is and its features, including the additional riders and exclusions, as well as those of life insurance.

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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