A life insurance policy can help achieve goals like children’s education and retirement. In such a situation, while buying a policy, definitely draw a blueprint of future plans and evaluate how much it might cost. This will help you buy the right policy.
One thing to keep in mind is that one policy cannot meet all goals. For example, if you want to fund your child’s education and protect your family members as well as create a contingency fund for your spouse, a single term insurance plan cannot achieve all these goals.
How to determine adequate life cover?
When buying a policy for the first time, most people are confused about how much cover to get. This advice is good but each person should decide the cover based on their financial needs. For this a decision can be taken based on income, debt, savings and lifestyle etc.
Continue to review your needs
Financial needs are different at every stage of age. Your financial needs will be different when you are single and your financial needs will be different when you have children. In such a situation, it is important that you keep reviewing your financial portfolio at annual or regular intervals. While doing so every year may be burdensome for some, review your security needs at life milestones like your wedding, new home, birth of a child, etc.
Disclose all necessary information
The main objective of buying a life insurance policy is to provide financial support to the family in their absence. In such a situation, while purchasing the policy, disclose all information about yourself so that there is no problem in the settlement process in future.
Do your own research and choose
You can consult your financial advisor about which policy you should buy. However, before buying a policy, one should do research on their own, instead of just relying on the advice of experts. You can contact people near you and view important statistics like claim settlement. This will help you choose an insurance company to purchase a policy from.
Salient features of a life insurance policy
Death Benefit – Under a life insurance policy, in case of premature death of the life assured during the policy tenure, an amount assured known as death benefit will be given to the nominee to help your financial dependents meet their daily requirements and life goals.
Investment opportunity – Life insurance can act as an investment opportunity if one chooses to invest in ULIP, money back and endowment plans as these plans offer dual benefits of life cover.
Exemption from tax – Under Section 80C and 10 (10D) of the Income Tax Act, 1961 one can avail income tax benefits by investing in a life insurance policy.
Maturity benefits- Various life insurance policies provide a maturity benefit at the end of the policy term if the life assured has survived the entire policy term.
Loans-Some life insurance policies offer loans against collateral policy facilities that can help a person meet immediate financial requirements like treating medical emergencies or help a person meet financial obligations.
A life insurance policy involves a contract between the policyholder i.e. the customer and the insurer i.e. the insurer. An insurance company that states that a lump sum will be paid to the policyholder after his unfortunate demise or after a specified period of time. At the time of policy inception the policyholder selects a nominee on his behalf and funds are provided to this nominee.
Not all life insurance policies mature at the time of death. Many life insurance policies are purchased for a specific period and mature after the tenure decided. There are many life insurance policies in the Indian market.
Types of Life Insurance
Whole Life Insurance:
These plans are in effect till the policyholder survives, provided the required premium is paid. On the death of the policyholder, the scheme pays an assurance and bonus of if any to the nominee.
Child Plans:
A child plan in a life insurance policy is dedicated to building a financial corpus for your children. By estimating the timing and intensity of your children’s financial needs, you can buy the best life insurance policy that can help your children at a crucial stage in their lives.
Investment Plans:
Investment schemes come into the picture if you are waiting for capital to build for you. With investment schemes, a part of your premium is invested in various financial instruments and returns are accepted by you. Investment schemes come with certain risk and hence should be bought with great understanding. The investment frequency can be weekly, monthly and quarterly. Along with the savings, you get the benefit of insurance coverage.
Endowment Plan:
Also known as traditional life insurance plans, an endowment policy is a combination of a life coverage plan and a savings plan. With life coverage, the policyholder can save their funds regularly for a specific period of time. If the policyholder advances the policy term, the insurance provider pays him/her the maturity benefit
.
Money-Back Plan:
In a money-back plan, the policyholder is eligible to receive a certain percentage of their sum assured at regular intervals. This type of life insurance is ideal for those who want to invest with the benefit of liquidity.
What are the benefits of life insurance?
There are a plethora of benefits when you invest in a life insurance policy. Life insurance is a financial instrument that enables a person to create a safety net for their loved ones in case anything unexpected happens in their life.
Financial Security : Provides financial security to your loved ones in case of any uncertainty like death or disability.
Secure your child’s future : Secures your child’s educational and various other needs.
Retirement Planning : Provides financial independence in your post-retirement years.
Insurance with Savings : Enables you to build a corpus to meet your financial needs at every stage of life.
TAX BENEFITS : Avail tax benefits against premium paid under section 80C and 10(10D) of the Income Tax Act, 1961
Loan facility : Get a loan against your life insurance plan to meet any unforeseen situation.
Key Features of Top 5 Life Insurance Plans
LIC Tech Term Plan : A pure life cover that comes with two death benefit payment options like Level Sum Assured or Increasing Sum.
HDFC Life Sanchay Plus : Along with many other benefits, this scheme offers guaranteed returns to the insured and their family.
SBI Shubh Nivesh Yojana : A traditional savings plan that comes with two investment options – endowment plan and whole life plan.
ICICI Protect Smart : Provides 360-degree protection to your family, allowing in case of your unfortunate demise.
MAX Jeevan Online Term Plan : An online term insurance plan that caters to your family needs and offers 3 payment options for the family – one time lump sum, lump-sum with monthly income, or lump sum with increasing monthly income.
Conclution
A life insurance policy is much more than a source of coverage and thus includes numerous features. Life insurance stands as a reliable financial support for your family in unforeseen circumstances. Check the claim settlement record of the concerned company while taking a life insurance policy.