Life Insurance: A Vital Step in Securing Your Family’s Financial Future
One of the best ways to manage life’s uncertainties and protect your loved ones is by purchasing life insurance. It plays a crucial role in ensuring your family’s financial stability, especially in the event of your absence. According to Forbes Advisor India, obtaining life insurance should be a priority before starting any financial planning, as it offers essential protection for a variety of reasons.
This comprehensive guide provides a detailed overview of life insurance, including its definition, different types, and the key benefits it offers.
What Does Life Insurance Cover?
A life insurance policy is a contract between the policyholder and the insurance company, where the policyholder pays regular premiums in exchange for a payout upon their death or after a specified period.
- Life Cover: This refers to the lump sum payment made to your beneficiaries (usually family members) if the policyholder passes away. It helps to secure their financial needs, such as daily expenses, education, and debt repayment.
- Maturity Benefit: In many life insurance policies, if the insured person survives the policy term, they receive a sum known as the maturity benefit. This amount is typically paid at the end of the policy period and serves as a form of savings or investment return.
Principal Life Insurance Types
1] Total Defense
Term insurance is the most basic type of life insurance. Its main purpose is to protect your family financially if something happens to you.
If the insured person passes away, the policy pays a lump sum to the beneficiaries. The premiums for term insurance are much lower compared to other types of life insurance, making it an affordable option.
2] Protection and Savings Life Insurance Plans
Protection and savings life insurance policies not only offer life coverage but also help you save for long-term goals, such as your children’s college tuition or marriage. These plans combine life insurance with a savings component, providing both wealth accumulation and financial protection.
- Endowment Plans: Combine life insurance with savings for a lump sum at the end of the policy.
- ULIPs (Unit-Linked Insurance Plans): Insurance paired with investment options.
- Money Back Plans Life cover with periodic payouts.
- Child Plans: Help save for your child’s future goals, like education or marriage.
- Retirement Plans: Provide income after retirement.
- Whole Life Plans: Offer lifetime coverage.
3] Why Do I Need a Policy of Life Insurance?
There are many unknowns in life. Everybody wants to make sure that they and their loved ones are financially secure in the future, especially those who are totally dependent on them.
A life insurance policy protects your personal debts and leaves your nominees with a certain amount of money in the event of your death. A life insurance policy offers many benefits in addition to serving as a safety net. In addition to the tax benefits, it also assists by offering guaranteed income after a predetermined amount of time. Under section 80C of the Income Tax Act of 1961, the premium paid under a life insurance policy may be claimed as a tax deduction.
Therefore, it makes sense to purchase life insurance, and anyone with dependents should do the same. If the primary provider of income were to pass away, life insurance would be extremely helpful in covering your loved ones’ enormous unmet debts as well as regular expenses. It is without a doubt one of the most reasonably priced solutions to safeguard your finances for those who depend on you financially, such your parents, children, or spouse.
4] How to Select the Appropriate Type of Life Insurance Policy
-} Evaluate Your Financial Objectives: Everyone has different financial objectives. For example, term insurance is a great option if your main concern is protecting your family. because, in your absence, it gives your candidates a substantial sum of money. On the other hand, you may want to think about insurance plans like ULIPs or savings or endowment policies if your objective is long-term, like purchasing a home or paying for your children’s school.
-} Evaluate Your Life Insurance Coverage: It is recommended that your life insurance coverage be ten to fifteen times your yearly salary. It is important to evaluate life insurance policies in light of one’s financial commitments and other objectives. To determine the appropriate amount of life insurance, you must consider the annual expenses of the family, any outstanding debts, the wedding, and the children’s education.
-} Pick the Appropriate Policy phrase: Consistently use the appropriate policy phrase. The years when your family will be financially dependent on you should ideally be the policy’s duration.
-} Uncover Every Detail from Your Life Insurance Company: Don’t withhold important information from your insurer, such as your medical history, financial responsibilities, or lifestyle choices. These elements affect how your claim is settled going forward.
-} Always be aware of the lock-in time: When you’re not happy with your current coverage, the lock-in or free-look term is very important. Many insurance providers offer a 15-day lock-in period during which an insured person can return a policy and get a new one if they’re not happy with the first purchase.
-} Invest in life insurance Young Age: Purchasing a life insurance policy when you are still young is typically advantageous because life insurance premiums are generally quite inexpensive. As your salary rises, you can always start with less coverage and add more riders one at a time.
-} Verify the CSR (Claim Settlement Ratio): The number of claims settled by the insurance company relative to the total number of claims received in that specific year is known as the CSR, and it is expressed as a percentage. Selecting life insurance providers with a high ratio of claim settlements is advised.
5] Life Insurance Benefits
-} In exchange for the premiums paid, a life insurance policy offers financial compensation in the form of life coverage to the insured and their family.
-} Depending on the insured’s insurance needs, insurance firms provide a range of plans. The benefit is that one can buy insurance policies based on their needs and financial objectives.
-} Critical illness treatment and hospitalization costs are also covered by insurance policies.
-} Over time, life insurance plans contribute to the accumulation of wealth by encouraging savings.
-} With some life insurance policies, the insured may also be eligible for a borrowing facility.
-} Because insurance premiums are tax deductible under section 80C of the Income Tax Act of 1961, insurance policies also offer tax benefits.
6] How Life Insurance Operates
When you pass away, life insurance policies give your loved ones with financial support through life insurance. These insurance also help a person and his family achieve a number of financial goals at the same time. The following are some of the objectives listed below that can be achieved by an individual with the best life insurance policy:
-} Financial protection against death should come first.
-} Children’s Education.
-} Child’s Union.
-} Purchasing a Home.
-} Pension after retirement or a steady salary.
The greatest feature of life insurance coverage is their great adaptability. With the aid of life insurance policies, long-term financial objectives are simple to accomplish. For example, a policyholder may use the corpus generated by an endowment plan to finance a home at a later time.
7] Procedure for Settlement of Life Insurance Claims and Documents Needed
-} In the event of an unfavorable incident, the beneficiary must promptly submit a claim submission form to the insurance provider.
-} Information including the date, location, and cause of death should be included in the claim notification.
-} Following the successful completion of a claim intimation form, an insurance company may request further documentation, including a copy of the policy and/or a death certificate.
-} Once the insurance company has verified the claim and given sufficient clearance to all provided documents, the claim is settled.
8] India’s top providers of life insurance
Read our in-depth post on the best life insurance policies in India for additional details on the list of top policies currently offered on the market.
9] How to Purchase An Online Life Insurance Policy
A straightforward and hassle-free procedure can be followed to purchase life insurance coverage online with great ease. By taking the actions listed below, one can purchase a life insurance plan online from any insurance provider:
Step 1: Go to an insurance company’s official website and select “calculate premium.”
Step 2: Provide personal data, including name, contact details, birthdate, and annual income. Select “calculate now.”
Step 3: Click “Proceed” after entering the life insurance amount and premium payment period according to your needs.
Step 4: Click “proceed” after choosing different riders, if desired.
Step 5: Click “pay” after choosing your online payment option. Policies can be paid for online with UPI, net banking, or credit/debit cards.
Step 6: Your life insurance policy will be sent to you via WhatsApp or email shortly.
