The Most Important Financial tool is Life Insurance which gives security to the family in case of any unfortunate event. Finding the right life insurance policy — whether you are a salaried employee, business owner, or self-employed professional — is crucial to protect your family financially in the event of your demise.
This blog will discuss all about life insurance, its types, advantages and tips to select life insurance that meets your need.
What is Life Insurance?
Life insurance is a binding agreement between a policy owner and an insurance company. The policyholder pays a certain amount in premium, for which the insurer pays the nominee an amount after the death of the policyholder. Certain plans also provide survival benefits once the policyholder survives the tenure.
- Life Insurance best policy offers financial help for your family in a blog post.
- The Different Types of Life Insurance Policies
- There are several types of life insurance policies with varying financial aims:
- Term Life Insurance
- The cheapest and simplest type of life insurance.
- Covers you for a set amount of time (10, 20 or 30 years).
- In case of the insured’s demise within the policy term, the nominee receives the sum assured.
- They do not grant any survival or maturation bonuses.
- Best for: Young professionals or anyone seeking high coverage at low premiums.
Whole Life Insurance
Covers lifetime (up to 99/100 years).
- The premiums are more expensive than term life insurance.
- Provides death benefits and survival benefits.
- Best for: Someone who wants their family to be financially secure for life.
Endowment Plans
- Insurance coverage and savings plan combined
- It pays a single amount after the term of the policy.
- Best for: Those seeking life insurance with guaranteed savings.
Money-Back Policy
- Regular incomes during the term of the policy.
- The policy’s nominee is paid the entire sum assured in the event the policyholder dies.
- Best for: Those who require liquidity at various stages of life.
ULIP (Unit-Linked Insurance Plan)
- Combines insurance with investment.
- Part of the premium is invested in market-linked funds.
- Best for: Those interested in long-term wealth creation with a side of insurance.
Child Insurance Plan
- Its Educate a Child Fund secures a child’s future education and financial needs.
- In case of any unfortunate event provides a lump sum amount.
- Best for: Parents who want to save for their child’s college or marriage.
Retirement/Pension Plans
- Aides in planning finances after retirement;
- It offers the benefit of regular income post retirement.
- Best for: Retirement planners seeking independence and security.
Benefits of Life Insurance
- Financial Security for Family
- Life insurance will ensure that your family is financially secure even in case of your demise.
- Tax Incentives Involved With Life Insurance
- Life Insurance premiums come under the eligibility for tax deductions under section 80C
- The amount on maturity is exempt under Section 10(10D) in most cases.
- The right life insurance policy can also help in tax planning.
- Wealth Creation
- Policies like ULIPs and endowment plans assist in the long-term accumulation of wealth.
- Loan Against Policy
- Most life insurance policies allow you to borrow against the policy.
Peace of Mind
The peace of mind you get with life insurance, knowing that your family’s financial security is taken care of, is priceless!
How to ensure the life insurance that fits your needs?
For those of you who don’t know how to select life insurance, here are several crucial things you should take into consideration:
Assess Your Financial Needs
Before choosing a life insurance policy, calculate your family’s expenses, liabilities and future goals.
Your coverage should be at least 10-15 times your annual income.
Compare Different Policies
Explore different life insurance plans in the market.
Compare the premium, sum assured, policy term, and claim settlement ratio.
Look for the Claim Settlement Ratio of the Insurer
The claim settlement ratio (CSR) is one important figure that indicates that the insurer has a good history of settling claims.
Get Policy Riders and Add-Ons
You can enhance the coverage of your policy by adding riders like accidental death benefit, critical illness cover, and waiver of premium.
Select a Policy That Suits Your Wallet
Choose an economical life insurance policy completing your financial needs.
Read the Policy TermsClosely
Before buying, also check the policy exclusions, waiting periods, and claim conditions.
Conclusion
Learn how to pick the best life insurance policy for your family’s financial future. When you go with either term life insurance, whole life insurance, or if you do, investment types, then a savings financial plan that fits your financial goals.
A good choice of life insurance gives long-term financial security to you and the beneficiaries of your policy, and with a little knowledge of ways to select life assurance, policy comparison, and individual evaluation, you can make an informed choice.
