It is human nature to plan for the future. This is especially important in these uncertain times when financial security for your family must be prioritized. A life insurance policy is an important step of financial planning because it guarantees predetermined financial assistance in the event of the policyholder’s untimely death.
Although there are multiple benefits of life insurance policies, the general public’s lack of knowledge is a significant impediment. According to government data analysis, nearly 988 million Indians, or roughly 75% of the population, are not covered by any type of life insurance product. If you want to know more about life insurance policies, read on.
What is a Life Insurance Policy?
A life insurance policy is an official agreement between a policyholder and an insurer to pay a set amount of money to the policyholder’s designated beneficiaries in the event of the policyholder’s untimely death. In exchange for the policy, the policyholder pays a predetermined amount of money on a regular or lump-sum basis. The amount paid by the policyholder is referred to as the premium, and the amount guaranteed by the insurer is referred to as the sum assured.
Insurance companies offer various types of insurance policies both offline and online. An applicant should look for an insurer that offers the best comprehensive plan at a reasonable price.
What are the Types of Life Insurance?
Life insurance policies are broadly classified into two types. The first is primarily concerned with risk coverage. The other is a hybrid of insurance and investing.
| Life Insurance Policy | Coverage |
| Term Life Insurance | Pure risk cover |
| Whole Life Insurance | Coverage till 100 years |
| ULIP Plans | Life coverage + Market linked returns on investment |
| Money-back Plans | Life cover + Regular income |
| Endowment Plans | Benefits of savings+ Life cover |
| Retirement Plans | Retirement corpus for financial freedom |
| Child Plans | Securing your child’s future by creating a corpus for education, marriage and more |
Every plan has a distinct benefit. With so many options available, you must choose a life insurance policy that best meets the needs of your family.
How Does Life Insurance Work?
How does life insurance work generally depends on the policy chosen and the premium paid. Policyholders who outlive the plan receive their premiums at the policy’s end.
What are the types of Riders Available?
There are different types of life insurance riders (add-on benefits) offered by the insurers, some of these are:
Critical Illness Rider
The rider is triggered upon the diagnosis of a certain life-threatening disease. It provides the policyholder with the sum assured, which aids in the payment of treatment costs.
Waiver of Premium
This rider is beneficial in the event of a policyholder’s accident, which renders him disabled and unable to pay his premiums. The premium is waived in the event of the insured’s death or disability, and the policy remains in effect.
Accidental Death Benefit
In case of the policyholder’s accidental death, the nominee gets the sum assured along with the additional accidental benefit.
Why Should You Purchase a Life Insurance Policy?
Not just the life cover benefit to secure your family’s future, a life insurance policy has several benefits to the policyholder. These includes:
- It acts as collateral to loans
- It is an effective tax saving instrument
- It is a good investment product
- Financial security of the dependent family members
Life insurance is a risk-mitigation and risk-protection tool. The policy assists the policyholder and dependents in a variety of ways when dealing with life events. You can make an informed decision by understanding the key features and benefits of a life insurance policy.
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