What is Life Insurance?
Life Insurance is a financial cover for a contingency linked with human life, like death, disability, accident, retirement etc. When human life is lost or a person is disabled permanently or temporarily, there is a loss of income to the household. Although human life can be valued monetarily, the sum assured is given to the family of the deceased so that they continue to live without any immediate financial problems.
A term plan is the most simple form of life insurance. The policyholder pays a small amount monthly/yearly throughout the term of the policy which is fixed. The benefits are transferred to a family person nominated (nominee) by the insured so that if something unfortunate occurs, your family can use this lump sum of money without worrying about finances. You can also choose to have your loved ones receive the pay-out in the form of monthly/annual pay-outs.
An endowment plan is an advanced form of life insurance which combines the benefits of both insurance and investment. In these plans, a certain part of the premium is keep reserved towards life cover and the rest is invested by the insurer. Bonuses are also declared periodically which is paid either on maturity or after death of the policyholder. The beneficiaries get the lump sum amount along with the accumulated bonuses after the death of the policyholder or to the policyholder after maturity.
Frequently Asked Questions
Term Insurance - Simplest form of life insurance in which the beneficiaries get the lump-sum benefit after the policyholder dies. However, you will receive no payment if you survive the pre-determined term.
Endowment Plan - This is a combination of both insurance and investment. The policyholder and the beneficiaries can get the benefits either at the end of the maturity period or after the death of the policyholder. The risks in the investment process are borne by the insurance company.
ULIP (Unit Linked Investment Plans) - This is much riskier than other plans and the insurance company invest the amount in debt or equity market as per your choice. The investment risk involved here is much higher.
Pension Plans - This plan ensures that you have enough money to spend and take care of your expenses after your retirement. A good pension plan generally beats the inflation rate and gives you a monthly payment similar to a salary. These annuity payments can be either monthly, quarterly, half yearly, or yearly.
Money Back Life Insurance - In this plan, the insurance company pay a certain amount every month while the insured is alive and the sum assured is given after the policyholder expires.
Why Life Insurance
Life Insurance is a great financial instrument encourages savings and help to plan your retirement in a wise manner. In some cases, it also provides a tax benefit. It safeguards your family against financial problems if any unfortunate event takes place.
What is covered
All natural deaths along with accidental disabilities are generally covered by Insurance Companies. However, proper documentation is necessary to ensure a hassle-free claim settlement process.
What is not covered
The life insurance company would investigate in unnatural death cases. These reasons of death are generally not covered in life insurance.
Consumption of drugs, alcohol or any intoxicated stuff
Participation in a criminal act
Due to war
Due to pregnancy or childbirth
Due to self-inflicted injuries or suicide
Choosing the best life plan for your family
Search, compare and then buy a life insurance plan. Before buying, compare the quotes of various companies. Primarily, it depends on the following factors -
No of Dependents
Amount of Sum Insured
Age and current salary
Claim settlement ratio of the company
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