Life insurance is a financial contract between the individual and the insurance company, where the insurer provides an assured policy coverage to the policyholder in exchange for the monthly payments as premiums as accepted by the policyholder. As the name suggests, it ensures lifelong financial safety to the insured by providing the death benefit to the beneficiaries of the policy in case of the demised of the insured person during the tenure of the policy or maturity benefit to the insured person if he/she survives the entire tenure of the policy.
The workability of any policy depends on its crucial components; likewise, life insurance has these components too. It operates between the death benefit, premium, and a maturity benefit.
The death benefit is the amount of money that the insurance company pays to the beneficiaries mentioned in the policy after the insurer’s death. The death benefit paid to the nominee is equal to the total sum assured amount offered by the policy.
Premium is the monthly or the yearly payable amount, which a policyholder pays to cover the purchased insurance. It revolves around the life expectancy of an individual and his paying capacity, differing with the covered risk amount.
Maturity benefit or survival benefit is the total sum assured amount offered to the policyholder after the completion of the policy tenure, in case he/she survives the entire tenure of the policy.
to fulfill the requirements of the insurance seekers, there is an extensive range of life insurance policies available in the market.
let’s take a look at it:
|Life Insurance Policy Plan||Features|
|Whole Life Insurance Plan||
Eventualities can happen to anyone anytime. Thus it is very important to safeguard the financial future of your loved ones, and the best way to do so is to have a life insurance policy. As there are a plethora of benefits offered by the life insurance plan, here we have mentioned some of it:
The following points are some reasons why one should not delay or hesitate to renew their life insurance policies:
NBFCs (Non-Banking Financial Company), within the limitations of applicable terms and conditions, lend loans to a policyholder, based on the type of life insurance and surrender value opted by him. One thing that matters here the most is the loan amount, which plays an essential role in making the life insurance loan collateral.
The opted loan amount is typically based on the percentage of the surrender value of the life policy, which can, at times, go up to 90%. But, to manage the risk well, there are a few companies that allow a loan up to 50% of the total premium amount to be paid by the policyholders.
An opted life insurance policy offers you a smooth transition, which can make it act as a secured financial product. By getting appropriate insurance coverage the policyholder can protect the family against any type of eventualities. The death benefit offered by the life insurance policy is sufficient enough to take care of the liabilities of the policy. Also, it works as wealth creation in the long-term. The insurance buyers can choose to invest in term insurance plans as it provides higher insurance coverage at an affordable premium rate.
The retirement plans offered by life insurance policy not only provide insurance coverage to the family of the insured but also provides an opportunity to create wealth in the long-term so that they can live a secure life after retirement. Life insurance pension plans become the best instrument that offers steady pay-outs in the form of annuities. In simple terms, it acts as a source of pension during retirement.
It is more than just a plain instrument that offers an assured replacement at the loss of income but also acts as an investment that offers a significant return on the amount of the premium paid, during an active tenure of the policy. As per the choice of the policyholder, several life insurance plans offer considerable returns at the time of maturity. So, it offers dual protection by letting the buyer achieve investment goals and protecting the family from a sudden income loss.
Tax Benefit offered by a life insurance policy makes it a lucrative deal for many policyholders.
For paying the policy premium, a policyholder can avail tax benefit under Section 80C of the Indian Income Tax Act, 1961. The premium paid up to the maximum limit of Rs.1.5 lakh is eligible for tax exemption.
The maturity proceeds are eligible for tax exemption under section 10(10D) of the IT Act.
A payment mode chosen by an individual in many ways affects the premium of a life insurance policy. Moreover, the mechanism behind the discount is just that, the insurance company's administrative cost considerably cuts down, once the premium is paid online. Since paperwork is excluded, the entailing cost also gets excluded. At the same time, it eliminates the middlemen or an agent hefty commission from the insured, which he charges for offline buying and renewal. Since the discount varies from company to company, there is no fixed amount.
For premium payments, insurance companies offer various payment periodicities as per the feasibility of the policyholder, like opting for annually, half-yearly, quarterly, and monthly mode.
Therefore, if a policyholder chooses to pay the premium in an annual model, the company uses it for investment purposes, which means more profit and benefit for the company. Once the mode opts, the discount is often already included in the charged premium rates.
It should be the businessman’s option as some life insurance company lends a helping hand to their policyholders who own a business. So, in case of the demise of the insured, his business partners can purchase the policyholder’s shares without much trouble. It is an agreement based option, where the stakeholders sign a bond, which let them own the policy, but binds them legally to pay the share price to the dependants of the demised.
Every right policy can fix all wrongs. A mindful purchase of a life insurance policy plan can bring umpteen benefits at the disposal of the policyholder.
The underwriting for the life insurance plan is not that difficult a task. However, certain aspects should be considered before purchasing the policy. Comparing Quotes: To be able to get the best rates, one must compare the quotes online. by comparing the quotes, one can choose the right plan as per their requirement and suitability.
A detailed overview of different life insurance policy-plans with features is listed above. But, when it comes to comparison, an individual is advised to look through them from the prism of ideal offerings. These ideal offerings can be the term involved, death benefits, maturity benefits, premium costs, and the additional take away, which the insurance companies add to make it more lucrative.