Death is an inevitable life event, but most of us wish to leave a legacy behind. A significant part of this legacy is a safe future for our loved ones. Needless to say, accidents and mishaps are strong indicators of how fragile human life is, making it important to insure lives.
This is exactly where you realise the importance of buying a life insurance plan. It acts as a protective cover to safeguard the insured’s loved ones in case of tragic events. However, it is important to know a few things before investing your money in buying the right life insurance policy.
What is a Life Insurance Policy?
A life insurance policy can be defined as a contract between an insurance company and the policyholder. The insurer promises to pay a certain amount in exchange for a premium upon death or after a set period.
Although the money cannot make up for the loss, it ensures no financial complications for the insured’s dependents. The life insurance policy offers much-needed cover against risks. Besides, it also allows you to grow your savings.
Features of Life Insurance
The risk of premature death is always there. Such tragic events not only create emotional havoc but can also affect you financially.
Now that you’re aware of what life insurance is, take a look at its features.
Issued in the name of Policyholder
A life insurance plan is always issued in the policyholder’s name, an individual who pays the premium towards the policy.
Usually, there is only a single policyholder for life insurance plans. However, joint insurance life plans allow more than one policyholder.
Flexible Payment of Premium
As already said, you must pay a premium to the insurance service provider in exchange for life cover. You can also select the frequency of premium payments.
For example, you can choose to pay the premium as a lump sum amount or pay them at recurrent intervals, such as monthly, quarterly or yearly.
Option to Assign Nominees
A nominee is an individual assigned by the policyholder to receive the financial benefits in case of the insured’s demise. Usually, the policyholder needs to assign nominees at the time of purchase of a life insurance policy.
But you can also choose the nominee in between the tenure. Besides, you have the option to switch the nominee at any point of the tenure.
Pay Out on Maturity or Demise
Another significant feature of life insurance is that the insurance provider pays the sum only under two incidents – upon the maturity of life insurance plan or death.
When the insurer pays the sum to the nominee in case of the policyholder’s death, it is called a death benefit. When the pay-out is made upon maturity, it is called maturity benefit.
Benefits of Life Insurance
Before you buy a life insurance policy or consider getting group life insurance, take a look at the top benefits of the same.
A life insurance policy allows individuals to safeguard the financial future of their loved ones in case of untimely demise.
The insurer pays the sum assured along with the bonus to the bereaved family. Life insurance is also beneficial for people with reducing income and advancing age.
A life insurance scheme yields better returns than other investment options. Most life insurance plans offer bonuses that no other scheme can provide. Most importantly, money invested in life insurance is safe and free from risks.
As per section 80C of income tax, life insurance is a great option for a tax deduction. Under this section of income tax, the investment made under certain instruments offers a tax rebate. A life insurance plan is one such instrument eligible for a tax deduction.
Riders include additional benefits that can be added to an insurance policy. These allow you to increase insurance coverage. Riders help cover risk beyond the scope of the primary life insurance policy.
These may cover personal accidents, critical illnesses, etc. Besides, riders also offer tax benefits, making you eligible for deductions.
What is the Standard Eligibility to Take a Life Insurance?
Before buying a life insurance plan, it is important to validate that you meet the eligibility criteria.
While the criteria vary for different policies, below is the standard eligibility criteria.
The person taking life insurance should be an Indian citizen. However, NRIs and PIOs can also take life insurance rendered in the country these days.
To complete the application, the policyholder must provide all the documents asked by the insurance service provider.
Keeping everything stated above in consideration, you’ll be able to find the right life insurance policy to secure the coming times of your loved ones.