Insurance Plans

Life Insurance Plan 

Life insurance is an agreement or contract between an individual and an insurer. In this, the policyholder is required to pay a certain amount as the premium charges of the policy while the insurance company pays a specific amount to their loved ones on the unfortunate demise of the life assured. The policyholder has to make regular premium payments to the insurer for a fixed number of years. Few life insurance plans also pay a maturity amount at the last of the policy tenure in case of the life assured’s survival.  

In certain types of plans, there is also an option to receive the benefit of critical illness or provide extra protection for your loved ones in case of your death due to an accident. Below are features and types of life insurance policies. Read on to know more in detail: 

Benefits of Life Insurance Plans 

A life insurance plan secures the financial interest of your loved ones when you are not around. Millions of individual purchases life insurance because of different objectives and it is a crucial component of financial planning due to the following benefits: 

1. Financial protection to your family 

   A life insurance plan will offer a certain amount of sum to your family or the assigned nominee at the time of your unfortunate death. The family can use that amount to fulfill various financial requirements. 

2. Protection against Accident, and disabilities, and Critical Benefit

   A rider is an additional benefit or a cover to the base plan that provides accidental benefits. Most plans offer an optional rider for extra security against accident and disability, critical illness. The rider can be purchased by paying an extra amount of premium along with the base plan. Critical illness benefit rider offers protection against various illnesses such as kidney failure, cancer, and cardiovascular problems. 

3. Tax Benefits 

   Get the tax benefits on paid premium and benefit of death received under the life insurance policy u/s 80C and 10(10)D of the Income-tax Act, respectively. 

4. Post -Retirement years planning 

   A life insurance plan is the right way to accrue wealth over the policy tenure and use funds during retirement years. Plans such as ULIP provide you the benefit of life coverage along with market-linked returns from your investment. 

5. Security from the stress of debt 

   In case if you have taken a loan, having a life insurance plan can ensure that in your absence, the stress of repaying the amount of loan should not have to be borne by your loved ones. Thus, they can use life insurance plans to achieve their financial goals and also help pay pending loans if they are unable to do that. 

6. Large coverage at low premium rates 

   Insurers offer substantial payouts for life insurance plans such as term insurance plans at a low premium rate, depending on your life goals, age, and medical conditions. 

7. Planning for the higher education of a child 

   Saving money for the higher education of your child might be one of the important priorities for you. By investing in the right policy, you can plan for your child’s future and help them protect their several educational objectives in life. 

Types of Life Insurance Plan 

Every insurance buyer must understand different types of life insurance plans before purchasing any of them. 

1. Term Insurance Plans

   A term insurance plan is a pure protection life insurance plan that offers extensive coverage at a minimal cost for a limited time. The low charges of financial protection ensured by a term plan allow you to enlarge your canopy beyond the death risk. In simple words, it provides a large sum assured amount at low rates. If the life assured dies during the pre-specified term of the policy, their payees will receive the coverage. Also, if the life assured selects a TROP (return of premium term plan) and survives the tenure of the policy, a maturity benefit will be payable, that is the full paid premium till date. 

   One can easily personalize the base term insurance plans by adding critical illness benefit, accidental disability, and death benefit. All these riders help you during severe medical conditions and disabilities which can affect your earnings in a long run. 

2. Investment Plans 

   1. Guaranteed Life Insurance Plans 

      Guaranteed Life Insurance Plans are the investment plans that can guarantee the value of maturity based on the amount of your investment. Guaranteed life insurance plans also act as a life insurance plan that helps you to increase the life cover of your family every time you commence investing under these plans. 

      The additional life coverage is idyllic as you should enhance your life cover when you discover and starts capitalizing on a new financial objective. With these life insurance policies, you can surely achieve your financial objective regardless of the performance of the market. 

   2. Unit Linked Insurance Plans (ULIP) 

      ULIPs are multipurpose investment plans from life insurers. These plans help you invest in funds with different levels of risk and build the portfolio of your investment while availing all the available tax benefits with life insurance plans. ULIPs also offer you options to regulate your portfolio automatically. These life insurance plans are right if you wish to multiply your wealth for a long investment time. In such situations, use ULIPs in the retirement portfolio. 

   3. Child Insurance Plans

      Child education or insurance plans are other types of investment plans offered by life insurance companies. However, these policies are specially designed to meet certain requirements such as child’s education and marriage. 

      While building the corpus to achieve your child’s future requirements, you can also keep your investment secured from unfortunate events. This security allows your investment to continue in case of your absence and offers the intended financial protection to your child at the time of maturity. 

   4. Pension/Retirement Plans 

      These plans are designed to create wealth for your retirement years to enjoy financial freedom. In this, nominees will receive the instant payout in case of your unfortunate demise during the policy tenure. Else, you will get the maturity benefit on surviving the tenure. The retirement life insurance plan has two stages: Distribution and Accumulation. One goes through a stage of accumulation in your working years and builds a large retirement corpus. This corpus will be capitalized in a secure pension and retirement plan, which pays a regular amount to you as a pension. Different types of pension plans can be used depending on your age and risk appetite. 

How to Select the Right Life Insurance Plan? 

With the availability of a number of life insurance plans in the market, it is important to choose the right one. The selection of the right plan should depend on a comprehensive spectrum of financial requirements. Here are some steps to consider while purchasing the life insurance policy:

1. Gain knowledge about different plans 

   Without being aware of how life insurance works, individuals feel debilitated to decide about purchasing the plan. Thus, it is important to have a thorough understanding of different types of plans before selecting one. 

2. Determine your financial requirements 

   A life insurance policy that is right for you may not be good for you. Thus, you should consider your specific requirements, be it cost-effectiveness, selection of sum assured, or riders before comparing various plans 

3. Compare Life Insurance Plans 

   Always compare different plans in terms of their benefits before purchasing the life insurance plan. It is better to compare certain factors such as premium. Sum assured and a component of investment (if any).