Looking for Investing in a Life Insurance product? But not sure exactly how it works?
Well this page is aimed to give you a complete understanding on how it works and what you need to understand to choose the products that suits you the best. As at every life stage, everyone has a set of primary needs that requires sufficient funds to fulfill them. This is where life insurance comes into the picture- as it offers tailor made products to cover every aspect at different stages of life.
There is no doubt that life insurance is a must have for everyone. Hence its very crucial to have a complete understanding of the value a life insurance policy can bring in to your life and that of your loved ones.
A life insurance policy is actually a contract with a insurance company. A lump sum amount is provided, in exchange for premium payments, known as the death benefits, to the nominees or beneficiaries upon the death of the insurer.
While choosing a life insurance, the advisor will help you to map it needs & goals. This will help you pick out the options that suits you the best.
What Does It Offer?
Insurance has lot to offer in terms financial security and peace of mind. It ensures that your family is taken care of in your absence. It not only helps in providing coverage for all sorts of risks, but builds an opportunity to help you grow your investments. Life insurance is a long term investment tool that helps you meet future costs like children's education expenses, retirement expenses etc.
There are plenty of life insurance plans available, depending on an individuals needs, many of these plans can also be customized to meet their likes.
Types Of Insurance
Term Life Insurance
The most affordable form of life insurance, premiums of plan under this category are cheap compared to other life insurance products.
In the event of an unfortunate demise during the policy term, Nominees will receive the ‘Sum Assured’.
Whole Life Policy
As in the name, this type of policy covers an individual for his/her entire life. This type of insurance covers insurance and investment components.
The insurance part covers the nominee in the event of death of the policyholder and the investment component helps the holder to borrow or withdraw against.
One main difference that Endowment Plans offer from term plans is the Maturity Benefit.
This type of plan pays out sum assured along with profits under both scenarios - death & survival. The profits that are availed in such plans are the result of investment in equities & debt.
Unit Linked Insurance Plans (ULIPs)
As the name suggests, this plan is linked to the markets.
This type of plan are a variant of traditional endowment plan and pay out a certain sum assured on death or maturity, whichever is earlier.
Money Back Policy
This type of policy gives out periodic payments over the policy term.
Incase of the death of the policy holder, the beneficiaries get the full sum assured and if the holder survives the policy term, he/she gets the balance amount (sum assured).
Benefits Of Insurance
Most of us are often tend to ignore the importance of sound policy as we think it not required and what could possibly happen to us.
This leads us to believe that life insurance is not worth the money for but a sudden mishap/accident leaves us feeling fearful of the future-for us & our family.
There is no two way about what an individual wants- financial security & protection; for which life insurance is the best option available. There are multiple advantages to availing a life insurance plan, let us glance at them:
Offers Risk Cover
In case of an unfortunate event, you and your family are protected with a high risk cover.
Sudden demise of a family member leaves the dependents grief-stricken and during such situations financial worries should be the least they should think of. An adequate life cover ensures that one's family is well taken care of in case of such incidents. The insurer pays up the bereaved family the sum assured along with any bonus or profits, as applicable.
Under Section 80C of Income Tax Act, investments made in certain specified instruments are subject to tax rebate. Moreover, Section 80C is an effective way by which a salaried person can reduce his/her tax liability. Since life insurance premiums are taken into consideration, it can be a way that will help you reduce your tax burden.
As per policy provisions, you can avail loan facility to meet any emergencies. The loan amount can be taken in a percentage of the sum assured of your life insurance.
Assured Returns/Income Benefits
Certain policies that offer money back benefits helps in keeping your family secure with regular & timely payouts. This income helps in meeting certain regular expenses like rent, bills, loans, etc.
Life Stage Planning
Insurance enables you to effectively plan for every life stage and needs during that stage. Life insurance can be viewed as long term investment instrument that provides solid financial support.
As per your life stage and risk appetite, you can fix and meet all your financial goals whether it is your child's education, wedding expenses, buying dream home or your retirement- all taken care of.
Your money is invested in life insurance is safe and returns are paid back on time. It also fetches good returns as the money is returned to the policyholder/beneficiaries as sum assured either on completion of the policy term or death, whichever is earlier.
Why Is It Important
Life insurance is of significant importance if you wish to protect your family or dependents from any economic hardship in your absence.
It's not an expense-many people think of it as one & choose to completely even consider its importance. It's an very essential tool that will help you build wealth and at the same time offer complete protection to you and your family.
Even if you have no immediate dependents relying on you financially, it doesn't mean that you don’t need a life insurance. There are many costs that you need to factor in and which needs additional income to fulfill them. Life insurance helps you meet such expenses while safeguarding your current income
Unexpected passing of an individual leaves a lot of void and the surviving members are left to cope with a lot of stress and trauma. And no matter what, expenses never ceases to exist; it just piles on- be it rent, childcare expenses, loans, etc. In such scenario, loss of income would cause an immediate financial hardship and your loved ones are left struggling. Nobody wishes this upon their family, hence life insurance needs to be seriously considered.
What To Buy
There are many categories of insurance policies available in the market today. Depending upon your needs and requirement your Financial Advisor will help you pick out the right one. You need to give complete details on your current financial status, along with your short term and long term goals, so that you Advisor is well-equipped to make a prudent choice for you.
There are many categories like Retirement plans, Money Back Plans, Child Protection Plans, Endowment plans and much more.
Remember, life insurance is a great tool for both protection and helping you save in a disciplined manner which eventually leads to creation of good corpus. With help of your advisor, fix your goals align them with your financial objectives and lead a stress free life with a financially secured future.
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