Until a couple of decades ago, getting life insurance was an elaborate process that required a lot of your time. Fortunately, things have changed for the better today. Not only do we now have a wide range of policy options with varying features and benefits, but they are also more accessible and less time-consuming.
Given this ease of process, there is no reason why you should not educate yourself about life insurance and get a policy that suits your needs. Let’s take a look at how life insurance works, its benefits, and its types.
What is Life Insurance?
When you leave this world, there may be a few things that you leave behind for your family members and your loved ones. This may include some wealth and possessions. Do you think that your family will be able to live their lives the way you would want for them, only based on what you leave behind? If the answer is no, then you realise that you need to make better arrangements to prepare for such a possibility. This is where you can turn to life insurance.
The wide range of life plans has something to offer for everyone. But the most common life insurance feature is the death benefit. Once you choose and buy a plan you want, you are required to pay regular premiums (plus any other fees, as applicable). If you happen to pass away during the policy term, your nominee can make a death claim. The insurer will then pay the death benefit to the nominee.
Benefits of Life Insurance
While each policy type offers some unique benefits, there are some common life insurance benefits that you may experience with all policies.
- Life Cover
A policy offers a life cover to the person insured. This means that upon the demise of the life assured, the nominee may claim and receive some financial support in the form of a death benefit.
- Maturity Benefits
Many life plans offer some form of maturity benefit. It could be a return of premium or some form of savings that your plan has accumulated for you over the term.
- Tax Benefits
Most life insurance plans offer tax benefits or exemptions. This may vary across plans and the prevalent income tax rules of the region.
- Riders & Benefits
Life insurance riders are add-on features that consumers can opt for, whereas benefits are add-ons that are built into the plan. These may include several choices that make your life plan more worthwhile. For example, a permanent disability rider/benefit will help you financially with medical care and other needs, in case you encounter disability as the result of an accident.
- Loan Against Policy
This may not apply to all types of life insurance policies, but you may be able to avail of a loan against some plans. You may consult your policy document, or a financial advisor to explore this possibility.
Types of Life Insurance Policies
There is a wide variety of life insurance policies. Hence, it is important to assess your needs first, instead of diving straight into buying a policy. Following are some of the types of life insurance policies:
- Term Life Plans: These are known to be simple life insurance options with affordable premiums. They are available in a few sub-types and can be bought online as well as offline.
- Whole Life Plans: These plans are also pure life insurance but offer a life cover for up to 99 years of age. If the life assured survives plan maturity, some policies may offer a maturity benefit.
- Endowment Plans: If you are looking to create savings while enjoying life insurance benefits, endowment plans may be what you’re looking for. Alongside savings as a maturity benefit, they may also offer periodic bonuses.
- ULIPs: Unit-linked Insurance Policy, or ULIP, is a type of plan that divides your premium into two parts – insurance and wealth creation. The latter part is directed towards the funds. You can choose the type of funds as per your risk appetite or let your plan manager do it for you.
As significant as the benefits of a life insurance plan are when choosing the plan, there is also a need to assess what you want. Armed with the right information about life insurance, you should be able to decide what is best for you.