Many types of life insurance products are available in the market; these products provide financial security and different benefits.
Life insurance is the cover a policyholder seeks to protect his family in his absence. It is the financial protection that is provided in the event of the death of the policyholder.
Categories Of Life Insurance Products
It is the most simple and pure form of life insurance, offering protection until the policy's tenure. If the policyholder passes away during the tenure, the nominee receives the death benefit. These plans offer high coverage at a low premium, and there are no maturity benefits.
These plans provide coverage till the death of the policyholder or, in other words, full life coverage with maturity benefits. Unit-linked insurance plans (ULIPs) - These plans have both insurance and investment combined in one. A part of the premium is used for insurance cover, and the rest is used to invest in market-linked mutual funds. These plans have tax benefits also.
An endowment plan is life insurance with a maturity benefit. Such a plan is suitable if you are looking for insurance coverage with a saving component.
In addition to these types, there are goal-based life insurance plans such as child insurance, retirement, and money-back plans to meet specific goals.
8 Ways Life Insurance Comes In Handy
Death Benefit -
It is the primary purpose of a life insurance policy. Death benefit provides financial security for the family after the death of the policyholder.
Saving Scheme -
If you purchase an endowment plan or any other type of life insurance with a maturity benefit, you can save for your future goals along with insurance. Such plans help build a corpus over a long period that comes in handy to meet future goals.
Investment Option -
Certain life insurance plans such as ULIPs act as an investment option also and invest a part of your premium into market-linked mutual funds based on your risk appetite. It gives you an option to choose from a range of funds, including equity and debt funds.
Planning For Life Stages -
Life insurance helps you plan and save for your future life stages such as childbirth, education, marriage and retirement. On maturity, the policyholder receives the total premium paid with interest and bonuses.
Emergency Fund -
Life insurance comes in handy for emergency requirements. A policyholder can easily take a loan against an active policy at a low-interest rate. It can be easily repaid in installments. Plans like money back policy or whole life insurance accumulate a cash value which can be easily borrowed during an emergency.
Income benefit -
Life insurance also offers a regular payout as income for the deceased policyholder’s family. This way it offers guaranteed long-term income for the family or spouse.
Critical Illness Cover -
Life insurance has a rider for critical illness coverage, which covers medical expenses if the policyholder is diagnosed with a critical illness.
Tax benefits -
A policyholder gets a tax benefit on premiums of life insurance under section 80 C of the Income Tax act. The sum assured that is received on maturity is also tax-free if the sum assured is minimum 10 times of the premium paid.
As we have discussed many benefits of a life insurance policy, it is important to consider some factors before choosing one. The most crucial factor is the sum assured, which you receive on maturity or as a death claim; keep in mind your future expenses, liabilities and cost of living before deciding on the coverage amount. Other factors include policy term, additional benefits, flexibility, claim settlement and premium you will pay throughout the policy tenure. Life insurance policies are a necessity in present times. It not only minimizes risk but also helps in managing important life events.