With the variety of life insurance products available for various needs, it is not uncommon for potential customers to end up baffled.
To make insurance decisions in your best interests, it is essential to know all the types of life insurance policies and their basics. The right knowledge will help you choose the right plans and make the best of them.
Here are some of the commonly asked questions about life policies, answered to make things simpler for you.
How does life insurance work?
When a person buys a life plan, it is usually to ensure that, in the event of their death, their loved ones are financially safeguarded. Suppose person A has purchased a life policy for themselves and named one of their family members as a nominee. In this case, person A is the policyholder as well as the life assured. They pay the premiums according to the terms and conditions detailed in the policy document. In the unfortunate event of person A’s death, before the policy has matured, the nominee can then avail of a death benefit from the life insurance. They can do so by filing a death claim with the insurance provider.
Since there are various types of life insurance policies available, details may vary. However, the primary purpose of most life plans is to extend a death benefit to the nominee of the life assured.
Is life insurance necessary?
Once you are well versed with how life insurance works, it is a valuable addition to your financial portfolio. No one can escape the worries concerning the wellbeing of their loved ones. While you strive to provide the best for your family throughout your life, they shouldn’t have to face financial difficulties if you aren’t there to provide for them.
If the thoughts of your family’s financial future after your demise worries you, life insurance can be a simple way to deal with it. While insurance may not be necessary, it can definitely be useful as a cushion against unforeseen situations.
What are the advantages of buying a life insurance policy?
There are numerous advantages to buying a life policy. Safeguarding the financial future of your nominee, and tax benefits, are some of these advantages. Along with a death benefit, additional life insurance riders and benefits include accidental death and disability rider, terminal illness benefits, permanent disability benefit, and more. This may vary across policy providers.
Wealth creation is an advantage with policies such as endowment plans and ULIPs. These plans offer maturity benefits, which means you can expect returns upon policy maturity. Life insurance riders and benefits may vary across the type of plans and policy providers.
What happens if I don’t pay my premiums on time?
Premiums are to be paid regularly and your payment frequency could be monthly, quarterly, or annually. If you fail to pay a premium on time, you may have a grace period to make this payment. This period is usually 15 days for monthly premiums and 30 days for others.
If you fail to make the premium payment during the grace period as well, your policy will lapse. A lapsed policy means that you will not be able to avail any of the benefits of life insurance.
Note that it is possible to revive a lapsed policy. You may be required to pay a nominal fee for revival and cover the missed premiums. You can consult an insurance expert for details about reviving a lapsed policy.
Can I claim tax benefits if I stop paying premiums on my life insurance policies?
No, you cannot claim tax benefits if you have not paid premiums on your insurance plans. If you fail to pay premiums, your policy lapses. You cannot avail of any benefits of life insurance on a lapsed policy. Unless you revive this policy, you will not be able to claim any tax benefits.
These were some of the basics of life insurance that the above questions covered. If you are considering buying a life plan, know that various options are available, and you can choose one that seems right for you.