Life insurance meaning lies far deeper than financial protection. It is a mutual contract between the policyholder and the insurer, where the latter offers to pay a lump sum amount to the designated beneficiaries on the policyholder’s death, depending on the terms of the chosen plan in exchange for a fixed premium to be paid at regular intervals.
The usefulness of life insurance
Life insurance can save your day to achieve several vital financial targets, especially during challenging circumstances. Some of the common uses of life insurance money include the following:
- Financial cover: Financial cover ensures proper financial support to the family despite the absence of the policyholder to maintain the standard of living and achieve financial goals easily.
- Child’s education: The education costs of children are reaching new standards. In the absence of any of the parents, especially if he/she is the sole breadwinner in the family, it becomes all the more difficult. However, a life insurance sum might prove to be highly beneficial for carrying out your journey smoothly.
- Child’s marriage: The life insurance sum can also be utilised to handle your child’s marriage well, especially under challenging circumstances.
- Buying a house: Purchasing a residential property is an achievement in itself. However, it is not an easy task. Moreover, if the policyholder passes away during the course, it becomes highly difficult for the family members to carry on with the loan. However, a lump sum received from life insurance can save your day.
- Post-retirement: A life insurance investment at an early age can provide you with post-retirement regular income or pension in your old age.
Types of life insurance
There are several types of life insurance policies currently available in the market:
- Term insurance:
This is the most popular and basic kind of life insurance form. They allow life coverage without any profits or savings component. In terms of premiums, this proves to be the most affordable form of life cover. - Endowment plans:
The endowment plans to pay out the amount of the sum assured under both circumstances of death or survival of the concerned policyholder on the completion of the policy term, as per the chosen term plans. - ULIP:
These plans pay out the sum assured amount or the concerned investment portfolio either on the maturity of the policy or the death of the policyholder. As ULIPs invest in the stock market, it is ideal for risk-loving investors. - Whole life plan:
As the name suggests, this kind of plan covers the concerned policyholder throughout his/her life. There is no concept of plan validity here, so the policyholder can enjoy the benefits throughout his/her life. - Money-back plan:
This offers periodic payments over the term of the plan. A part of the sum assured amount is paid out at regular intervals during the tenure. However, if the concerned policyholder manages to survive the tenure, he/she receives the balance sum assured. - Retirement plans:
They serve as post-retirement corpus. If your spouse is the nominee, in the face of any unfortunate event, he/she receives the sum assured and strengthens the familial financial setup. - Savings plan:
This encourages a regular savings schedule where you receive the lump sum on the maturity of the plan. - Child plan:
These plans are exclusively designed to support a child’s future dreams. They build up a corpus to handle the higher educational or vocational requirements as he/she grows up.
Benefits of life insurance
Life insurance secures our lives in more ways than one. Some of the major advantages of life insurance include the following:
- Protection:
Life is full of surprises and challenges. The effects of unprecedented challenges and accidents can be far-fetched for the family, especially in financial terms. A life insurance plan acts as a financial protection shield against such contingencies. Your insurer will pay the nominee or the designated nominee the pre-fixed death benefit by protecting your family. - Long-term savings:
Life insurance is a wise savings scheme that systematically builds a corpus for the future. The accumulated corpus can be utilised for several purposes like aiding your child’s education, marriage, completion of your house, etc. - Investment:
ULIPs are chiefly very reliable investment instruments. They are noted as serving for both wealth creation and financial protection. Most life plans offer significant returns on maturity, making them a lucrative investment option. - Tax benefits:
Life insurance qualifies for tax deductions u/s 80C, 10, and 80CCC of the IT Act of 1961 on the total amount of premiums paid in a financial year up to INR 1.5 lakhs. The death benefits are tax-free, while the maturity benefits up to INR 5 lakhs of premiums enjoy tax benefits u/s 10 (10D). You can even borrow against your existing life plan.
Conclusion
Investing in a worthy life insurance plan early in age will help you go a long way, especially in the case of unfortunate untimely challenges. So, to ensure a strong and protected financial future, invest in a reliable life plan without any further delay.
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