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.Read more
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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.
Life insurance definition in simple words: Life insurance is a contract that pays money to your family if you die, so they're financially secure. You pay regular amounts (premiums) to keep the contract active.
Rahul, a non-smoking male of 18 years age, with 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 from amongst the best term plans on Policybazaar and chose the one that best suits his preferences. He chose 1 Crore life cover for a 12 years 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:
There are two types of life insurance plans, as mentioned below:
Term Insurance Plans: Term insurance policies offer a lump-sum payout to your chosen beneficiary or family in the event of your unexpected demise. When compared with other life insurance options, these policies are known for their budget-friendly premium rates. They offer high life cover at a relatively low premium rate. For example, Rahul, as mentioned above, bought a term plan of 1 Crore life cover (sum assured) for a 12 years policy term and will be paying Rs. 525/month to keep the term insurance policy active. This way, he has financially secured his family for the longer run.
Savings Plan: Savings plans ensure consistent, guaranteed payouts to help you achieve your financial goals, such as buying a house or funding your child's education. They also offer life insurance coverage. For instance, if your aim is to generate wealth and build a fund for retirement, savings plans like ULIP are the best options.
Here is a list of 5 benefits of life insurance:
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.
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.
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.
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.
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.
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.
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
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.
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