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Life Insurance Guide For Beginners

Published On Jul 03, 2021, Updated On Jul 05, 2021

The world is full of uncertainties, and one never knows what might happen the next moment. Hence, it becomes vital to have a plan to sail through testing times. A life insurance policy acts as a financial safety net in such unforeseen and unfortunate events. The following article elaborates on different aspects of a life insurance policy to give you an exact picture of a life insurance policy's utility.

What is a Life Insurance Policy?

A life insurance policy is a contract agreement based on specific terms and conditions between the life assured and the insurance provider. A standard life insurance policy plan involves regular premium payments on the agreed sum assured by the life assured to keep the policy active and valid till the specific duration decided during the policy inception. In return, the insurance provider offers maturity benefits to the life assured after completing the policy term. Moreover, if the life assured dies within the policy duration, his/her beneficiary is provided with the sum assured as death benefits. Furthermore, additional benefits are offered to the life assured according to his/her chosen policy plan.

Why Should You Buy a Life Insurance Policy?

Here are certain factors which will surely convince you to purchase a life insurance policy. 

  • Financial Safety of Your Family - According to your life insurance policy plan, the insurance provider provides death benefits if the life assured dies before policy completion. The amount helps in handling the financial strain that is caused after the death of the family breadwinner.
  • Debt/Loan Repayment - The death benefits obtained after the death of the life assured can repay any outstanding home or business loans and debts left behind by the life assured. This ensures that your loved ones don't have to carry the burden of your debts on their shoulders.
  • Tax Benefits - Under Section 80C of the Income Tax Act, the life assured can enjoy tax benefits up to Rs. 1.5 Lakhs on the payable premium amount of their as well as their spouse or children’s life insurance policies.
  • Help in Medical Expenses - An insurance provider also offers add-ons that help make your plan more robust. Medical expenses like hospitalization and post-hospitalization care and costs can be managed through the right policy plan.

Types of Life Insurance Policies

The following list includes different types of life insurance policies offered in India.

  • Term Life Insurance Policy - Under this plan, the beneficiary receives death benefits in the form of lump-sum, monthly or annual mode if the life assured passes away before the policy completion. Moreover, a term insurance policy has no provisions to offer maturity benefits to the life assured if he/she survives till the tenure ends. 
  • Whole Life Insurance Policy - Under this plan, lifetime coverage of up to 100 years is offered to the life assured. The policy also has provisions to provide loans on the rising cash value component and if the life assured dies before the loan repayment, a reduced amount of death benefit is given to the nominee.
  • Unit Linked Insurance Policy - Under this plan, dual benefits of life coverage and investment opportunities are offered under a single policy. Moreover, the returns on the investment help build a substantial corpus for the life assured.
  • Endowment Plan - Under this plan, a twofold advantage of a life cover and savings option are provided to the life assured. Moreover, maturity benefits are provided after the policy completion even if the life assured dies before the term ends. 
  • Money-Back Life Insurance Plan - Through this plan, the life assured can fulfil his/her short term goals with the regular payments provided out of the sum assured. 

Endnotes

An insurance policy is a must in today's world, where the percentage of premature deaths due to unhealthy lifestyles and stressful work life is on the rise. The surety provided by the right policy will give you peace in knowing that your family will not have to suffer financially after you. Hence, try to choose the best policy for yourself through thorough comparison and detailed study about different policies in the market.

Also Read: 

10 Questions About Term Insurance Answered

Term Insurance Plans For All Age Groups

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard. 

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