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Life Insurance Plans & Policies in India
Life is unpredictable, there might be cheerful celebrations or multiple unforeseen circumstances that you can never think of. So better be prepared for the days. In such cases, life insurance can work as a strong financial shield for you and your loved ones with you or in your absence.
A life insurance plan is a contract between the life insurance company and the policyholder in which the company promises to pay a pre-determined sum amount to the nominee in case of the death of the policyholder or after the maturity of the policy. In return, the assured need to pay a premium amount for a certain time. A life insurance policy ensures the financial security of the family of the assured in case of an unforeseen event. Some life insurance companies in India also offer optional rider coverage, such as accidental riders, critical illness riders, etc.
The benefits of buying a life insurance policy are more than just providing financial security to the insured's family. A life insurance policy can help individuals to get tax benefits on the life insurance premiums paid and also avails multiple benefits received under the life insurance policy. A life insurance plan can be used as collateral for a loan. Hence, we cannot ignore the importance of life insurance in ensuring the financial security of loved ones.
Types of Life Insurance Plans
There are various types of life insurance available in India. The following are the different types of life insurance plans available in India:
1. Term Insurance
Term insurance is the most simple and basic type of life insurance plan. It is also known as a "pure protection plan". A term insurance plan provides a death benefit to the policy's nominee/beneficiary if the life assured dies suddenly during the policy term. This type of plan provides financial security to the family and loved ones in case of the absence of the policyholder.
2. Whole Life Insurance
Whole life insurance remains active till the policyholder is alive (up to 100 years of age). If the policyholder dies during the policy term, the insurer pays the sum assured under whole life insurance to the nominee of the policy. If the policyholder survives till the age of 100 years, the insurer pays the matured endowment coverage to the policyholder in the form of maturity benefit.
3. Endowment Life Insurance
Endowment plans are also known as traditional life insurance plans. It is a combination of savings and a life insurance plan. An endowment plan helps the policyholder to save his fund regularly to get the lump sum amount on the maturity of the policy. This maturity benefit is paid to the insured if they survive the entire policy tenure. In case of demise of the life assured during the policy term, the life insurance company provides the sum assured to the beneficiary as the death benefit of the policy.
4. Child Protection Plan
A child insurance plan is a combination of life cover and investment plan. It secures multiple stages of your child's future. The plan offers a lump sum amount at the end of the policy term and this amount can be used for your child's education and marriage.
5. Retirement Plan
The retirement plan is also known as a pension plan. It is a combination of investment and life insurance plans. A retirement plan or pension plan helps you to secure your post-retirement life financially. This plan helps you to get regular income even after retirement and helps you to become financially independent to enjoy post-retirement life.
6. ULIP Plan
The unit-linked investment plan is a combination of an investment and life insurance plan. This plan is specially designed for wealth creation and life protection. This plan invests your money in market-linked funds (stocks, bonds, mutual funds, etc). Generally, ULIP plans are flexible and transparent allowing you to customize your plan as per your needs and requirements.
7. Money-Back Plan
The money back plan is a combination of both insurance and an investment plan. Under money back plan, the policyholder gets regular payouts every 5 years as a survival benefit. These regular payments are usually equal to some percentage of the sum assured amount.
8. Savings & Investment Plan
The savings and investment plan is the best life insurance plan that channelizes your regular savings into safe and secure long-term investment returns. Under this plan, you can expect to get guaranteed maturity benefits along with a life cover. This plan covers both traditional and ULIPs so you can plan your short-term and long-term future expenses. As an additional benefit, these plans allow you to save on taxes.
9. Group Life Insurance Plan
A group life insurance plan is another type of life insurance that is eligible for a group of people in the same contract irrespective of their age, gender, occupation, or social/economical status. Generally, group insurance is preferred by organizations where employer prefers to cover all their employees under a single plan from the day of their joining to the day of resignation. This master life insurance plan covers every individual in the group, their children, and their dependent parents.
How Does Life Insurance Work?
Life insurance is a contract between the policyholder and the insurance company in which the insurance company promises to pay a lump sum amount to the policyholder or nominee. Life Insurance policies help achieve long-term financial goals and provide financial protection to your loved ones when you are not around. Life insurance policies are versatile in nature as they help achieve numerous financial objectives. Below are some of the goals:
Financial protection of the family.
Buying a House.
Education for Children.
Post-retirement pension.
Child's Marriage.
Why is Life Insurance Important?
Life insurance is important because it provides financial protection and support to your loved ones during your unexpected death. Life insurance can help your family pay for final expenses, such as funeral costs, and provide a source of income to replace your lost earnings. It can also be used to pay off debts, such as a mortgage or car loan, and cover ongoing expenses like childcare or tuition fees.
Having life insurance can give you peace of mind knowing that your loved ones will be cared for financially, even if you are no longer there to provide for them. Additionally, some life insurance policies can accumulate cash value over time, which can be used to supplement retirement income or pay for other expenses.
Life insurance is particularly important for individuals who have dependents, such as children or a spouse, who rely on their income to cover basic living expenses. It can also benefit business owners who want to ensure the continued operation of their business after their passing.
Reasons Why Life Insurance is Important?
Life insurance provides financial protection and stability to your loved ones during a difficult time. It helps ensure that they can maintain their lifestyle, cover expenses, and achieve their long-term goals, even in your absence. Life insurance is important for several reasons:
