Life Insurance is the safest and the most secure way to protect your family or dependents against financial contingencies that may arise post the unfortunate event of your untimely demise. Under a Life Insurance Contract in India, the insurer assures to pay a definite sum to the policyholder’s family on his demise during the policy term.
Understand the Life Insurance?
Life Insurance is an agreement between an insurance company and a policyholder, under which the insurer guarantees to pay an assured some of the money to the nominated beneficiary in the unfortunate event of the policyholder’s demise during the term of the policy. In exchange, the policyholder agrees to pay a predefined sum of money in form of premiums either on a regular basis or as a lump sum. If included in the contract, some other contingencies, such as a critical illness or a terminal illness can also trigger the payment of benefit. If defined in the contract, some other things, such as funeral expenses might also be a part of the benefits.
If mentioned in the contract, a policy may also cover some other costs like funeral expenses as a part of benefits.
Except for the death benefits, a Life Insurance plan also provides maturity benefits. These benefits are provided in the form of a payout if the insured survives the entire term of the policy. Moreover, life insurance schemes also offer several tax benefits under Section 80C of the Income Tax Act, 1961.
The insurance company will determine the premium payment that has to be made by the policyholder to the company. However, the claimant is given the option to choose the term of the policy and the sum assured. A number of factors are taken into consideration while determining the premium amount for every individual. The sum assured is amongst those factors. Higher the sum assured, higher the amount of the premium.
Why Need of Buying Life Insurance?
It acts as a financial net for an eventuality linked with human life, such as retirement, disability, accident, death, etc. Life is unpredictable; one can never guess what happens next. In case of sudden demise of the primary breadwinner of a family, apart from the emotional trauma, his/her family is at the risk of a financial crunch. In case this person is the sole breadwinner of the family, his/her dependents face a loss of income.
Though there is no premium calculator that can calculate the worth of a human life, what needs to be done must be done. To calculate the sum assured, the insurer takes your lifestyle and finances into consideration. This sum assured is provided to insured’s family after his/her demise in order to offer them a much-needed financial support. In order to make sure that one’s family doesn’t have to make any compromises due to financial crunches, one should buy a suitable life plan.
- Unpredictability-Life is unpredictable. One can’t predict when his/her life will come to an end. If it were up to people, nobody would want to leave without ensuring the financial security of his/her family. Sadly, it’s not up to them. The solution is, one must buy life insurance and be a step ahead so that the financial goals set for his/her family can be accomplished even when he/she isn’t around.
- Financial Cushion– It provides much-needed financial support to insured’s family by compensating for the loss of income.
- Debt-Proof Future– The sudden demise of a breadwinner is nothing short of a catastrophe. While it is an emotional crisis initially, it can get converted into a financial one in no time. With the help of life insurance, any outstanding debt, such as a motor loan, personal loan, a home loan, etc. would be taken care.
- The Accomplishment of Retirement Goals– While life plan is a perfect option to accomplish long-term goals, it helps accomplish retirement goals as well. Some life insurance plans offer diverse investment opportunities and some insurance plans offer performance-based dividends.
- Tax Benefits– A policyholder can avail tax-benefits regardless the type of life insurance he/she purchases. As per section 80 C of the income tax act, the premium paid towards an plan is eligible for tax benefits up to Rs. 1 lakh 50 thousand.
- Mental Peace– It offers much-needed peace of mind to the policyholder by assuring financial future of his/her family. Even a basic plan helps to generate corpus to take care of the future financial needs of insured’s family.
- Savings Tool– In case a person opts for a traditional/unit-linked plan, he/she pays an enhanced insurance premium. This extra amount of money is invested in the insured’s preferred fund and consequently acts as a savings tool.
- Children’s Future Expenses– A life plan takes care of all the future expenses of a policyholder’s children, such as education and wedding expenses. These days, the cost of raising a child is sky-high. Not just that, even getting admission in a reputed college costs a bomb. This policy ensures that the policyholder’s children don’t have to make any compromises as far as their education and personal needs are concerned.
- Business Security– While some life insurance plans cater to the needs of the insured and his/her family, there are some insurance plans available in the market that offer support to the insured’s business. It also enables a business partner to buy the share of his/her deceased business partner.
Once he/she knows what he wants, the next step is to shop around and compare life insurance plans that fulfill his/her requirement. The best insurance policy is plan that adapts to insurance buyer’s needs. This life insurance will help his/her family to sail through the tough times with grace.
Benefits of Life Insurance Plans
The perks of buying a life insurance policy go beyond protecting one’s family in tough times. Undoubtedly, it is a necessity to safeguard one’s dependents (in case of one’s unfortunate and untimely demise, accidents or physical disabilities that lead to a loss of income), but there is a long list of other benefits, too, that make it a lucrative choice among individuals.
Sadly, most people are not aware of the many benefits associated with it – all they care about, understandably, are the death and disability benefits. However, there is a long list of benefits attached to the policy such as maturity benefits, tax benefits etc.
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