Life Insurance



Life insurance is no less than an investment these days. It is a long term contract wherein the insurance company pays a lump sum amount after the maturity period or when the insured passes away. Whichever incident occurs first would be the period of payment by the insurance company. In return, the insured pays premiums in regular intervals for a stipulated period of time.

Importance of Life Insurance

Meeting Family’s Financial Requirement

The amount received on the maturity of a life insurance policy can help a family meet their expenses. Especially, when there is no other source of income in the family. The sort of coverage provided by life insurance plans can help in meeting expenses related to routinely activities like payment of bills, loan installments, fees and lot more. Though you can never plan how much money would be required by your family after few years you can definitely make sure that they receive a sufficient amount to bring their life back to normal.

Repayment of Loan

There can be various reasons why a head of the family decides to take a loan. It could be to start a new business, for the higher education of your child etc. No matter what the purpose is, repayment of the loan can be a burden on one’s family. This is when life insurance comes handy. Your loan repayment and other debts can be cleared using the money received from the life insurance claim.

Grant Of Loan

The life insurance policy is a powerful investment tool. It is a promise that the insured would receive a definite amount of money at a certain date or incident. This is a major reason you can use a life insurance policy as a mortgage too. Yes, your policy can help you draw loans against it.

Diverse Choices

None the less, a life insurance policy can be treated as a great investment option. You just need to invest a small amount of money for a good benefit in future. Modern life insurance companies have become pretty helpful and quick in response. No matter what your need is, there would be an ideal life insurance plan for you.

These companies provide different life insurance plans for varied purposes. This includes whole life insurance plans, child insurance plans, retirement plans and term life insurance plans. Each of these plans has its unique advantages.

Safeguard

One of the major functions of a life insurance plan is to provide protection from burden uprooting from uncertainties. The insured does not need to worry about how is going to cope with a long treatment plan, who is going to pay for the expenses etc. in old age. You can get yourself treated at the best hospitals with minimal tension.

Tax Benefits

Most of the insurance schemes are tax deducted in India. Means you can save tax while opting for an insurance scheme. You must refer the terms and conditions of a particular insurance plan before investing to know more.

Top Life Insurance Companies In India

  • Life Insurance Corporation of India
  • ICICI Prudential Life Insurance Co Ltd
  • Bajaj Allianz Life Insurance Co Ltd
  • Reliance Life Insurance Co Ltd
  • HDFC Standard Life Insurance Co Ltd
  • Birla Sun Life Insurance Co Ltd
  • Max New York Life Insurance Co Ltd

Types of Life insurance Policies/Plans

Whole Life Insurance Policy

As the name suggests this policy protects the insured person over his life. The risk cover of whole life insurance policy can extend up to 100 years of age. The main attribute of this insurance policy is that the period of maturity is not defined and the insured enjoys the benefits of the policy throughout the life. He receives regular premiums and a corpus amount is paid to the family after the insured passes away.

Term insurance

This is the most basic and cheapest of all life insurance plans. The life cover provided in a term insurance plan does not come with profits or savings component. It is pretty affordable when compared to other life insurance plans.

A term insurance plan assures the insured of a risk cover that provides low premiums and a fixed amount of money if the insured passes away during the policy term. However, there is no payment of the policyholder survives.

Endowment plans

This plan is quite different than the term insurance plan. On one hand, where the insurance company pays the profits and sum assured only on an eventuality during the policy term, an endowment plan promises you a fixed amount in both the scenarios. This means even if the insured survives through the policy period, he is assured to receive a fixed price with the profits.
However, the expense of investing in this plan is higher than the term insurance. The hike in fees and charges can be seen in the premium amount required to be paid by the insured.

Money Back Policy

This policy is a variant of endowment plan. It includes regular payment over the term of policy. Here, the insured is paid a balanced sum if he survives the term of insurance. On the other hand, full sum assured is paid if the insured passes away during the insurance period.

Things to know before buying Life Insurance:
  • What is the purpose behind your purchase of a life insurance policy? Is it for financial planning, to financial risk or something else?
  • What amount of life cover is right to meet your family’s needs in future?
  • What all aspects should you look at while buying a life insurance policy?
  • How can you be sure that the insurance plan is offered to you is right for your needs?

How To Choose a Life Insurance Policy?

Determine Whether You Need An Insurance Policy Or Not

A person should buy an insurance policy only if there is someone financially dependent on you. Though you can get life insurance through work also, it would not reap you many benefits and the coverage would also not be high enough. Moreover, it would be beneficial only if you stay with the same company for long.

If you are not married then there might not be any use of a life insurance plan for you. On the hand, married people with no property can also avoid opting for an insurance plan

Estimate The Coverage Amount

The amount of coverage you would want to take depends on the living expenses or the financial needs of your family. In order to determine the ideal coverage, you can multiply a month’s expenses or take home income to a number of years.

Calculate The Debts

Another way in which your insurance claim funds would be utilized is in the repayment of loans. In case you have any, do calculate the amount you owe to various entities. You may also add other expenses such as the need of funds for the education of your child, health treatments etc.

Analyze Other Sources Of Income

This includes the sources of income that would be available to your family after you pass away. This can include rental income, retirement plans etc. You need to add up the approximate sum rooting from these sources.

Calculate How Much Insurance You Need

Now that you have a clear idea of expenses and incomes, calculating the insurance needs can be easy. You can add all the expense and sources of income at the first place. Compare them to find out the financial needs of your family. You can also use an online insurance calculator to get the right estimates. Several insurance companies have an online calculator that can help you determine the exact amount for free.

Remember this should also include the money you need in old age. An elderly person requires money for varied activities such as to meet daily expenses, pay off medical bills etc.

Benefits Of Life Insurance
  • Life Cover
  • Life Stage Specific Planning
  • Long-term Savings
  • Tax saving