Looking for Life Insurance product? But not sure exactly how it works?
Well this page is aimed to give you a complete understanding on how it works and what you need to understand to choose the products that suits you the best. As at every life stage, everyone has a set of primary needs that requires sufficient funds to fulfill them. This is where life insurance comes into the picture- as it offers tailor made products to cover every aspect at different stages of life.
There is no doubt that life insurance is a must have for everyone. Hence its very crucial to have a complete understanding of the value a life insurance policy can bring in to your life and that of your loved ones.
One of the most important things you can do as parents is to ensure the financial welfare of your children in the event of your death. Life insurance is the best way to be rest assured that your children will be taken care of if you die. Although we never like to think of that kind of thing happening, but it does.
A life insurance policy is actually a contract with an insurance company. A lump sum amount is provided, in exchange for premium payments, known as the death benefits, to the nominees or beneficiaries upon the death of the insurer.
While choosing a life insurance, the advisor will help you to map your needs & goals. This will help you pick out the options that suits you the best.
What Does It Offer?
Insurance has lot to offer in terms financial security and peace of mind. It ensures that your family is taken care of in your absence. It not only helps in providing coverage for all sorts of risks, but builds an opportunity to help you grow your investments. Life insurance is a long term investment tool that helps you meet future costs like children’s education expenses, retirement expenses etc. There are plenty of life insurance plans available, depending on an individualneed many of these plans can also be customized to meet their likes.
Benefits of Insurance
Most of us often tend to ignore the importance of sound policy as we think it is not required and what could possibly happen to us? This leads us to believe that life insurance is not worth the money for but a sudden mishap/accident leaves us feeling fearful of the future-for us & our family.
There is two ways about what an individual wants- financial security & protection; for which life insurance is the best option available. There are multiple advantages to availing a life insurance plan, let us glance at them.
1. Offers Risk Cover
In case of an unfortunate event, you and your family are protected with a high risk cover.
2. Death Benefits
Sudden demise of a family member leaves the dependents grief-stricken and during such situations financial worries should be the least they should think of. An adequate life cover ensures that one’s family is well taken care of in case of such incidents. The insurer pays up the bereaved family the sum assured along with any bonus or profits, as applicable.
3. Tax Benefits
Under Section 80C of Income Tax Act, investments made in certain specified instruments are subject to tax rebate. Moreover, Section 80C is an effective way by which a salaried person can reduce his/her tax liability. Since life insurance premiums are taken into consideration, it can be a way that will help you reduce your tax burden.
4. Loan Facility
As per policy provisions, you can avail loan facility to meet any emergencies. The loan amount can be taken in a percentage of the sum assured of your life insurance.
5. Assured Returns/Income Benefits
Certain policies that offer money back benefits helps in keeping your family secure with regular & timely payouts. This income helps in meeting certain regular expenses like rent, bills, loans, etc.
6. Life Stage Planning
Insurance enables you to effectively plan for every life stage and needs during that stage. Life insurance can be viewed as long term investment instrument that provides solid financial support. As per your life stage and risk appetite, you can fix and meet all your financial goals whether it is your child’s education, wedding expenses, buying dream home or your retirement- all taken care of.
7. Safe Investment
Your money is invested in life insurance is safe and returns are paid back on time. It also fetches good returns as the money is returned to the policyholder/beneficiaries as sum assured either on completion of the policy term or death, whichever is earlier.
There are four basic types of life insurance that can meet you and your family needs:
This is the least expensive type of life insurance coverage, and at least at the beginning, the simplest. Term life insurance policies do not accrue cash value, and are fixed over an extended period of time - usually one to 0 years, and they can be renewed. This life insurance policy pays the beneficiary of your policy a fixed amount in the even that you die in the period of time that your policy includes. The premiums of term life insurance are lowest when you are young and increase as you get older
This type of life insurance is similar to term life insurance, as well as provides cash value. Over time, whole life insurance generally builds up a cash value on a tax-deferred basis, and some even pay its policy holders a dividend. This type of life insurance is popular, due to the cash value that is accessible to you or your beneficiaries before you die. Used to supplement retirement funds, or to pay for your child education, whole life insurance should be used for protection, rather than for accumulation.
This type of life insurance is a flexible kind of plan. These policies accrue interest and allow the owner to adjust the death benefits and premiums to their current life situation. You decide the amount of premium for universal life insurance, and of you skip a payment, this will be deducted from your death benefit. Universal life insurance stays in effect as long as your cash value can cover the costs of the policy. These rates are subject to change, but they can never fall below the minimum rate that is guaranteed when you sign up for universal life insurance.
This type of life insurance is designed for people who want to tie the performance of their life insurance policy to that of the financial market. The policy holder gets to decide how the money should be invested, and your cash value has the opportunity to grow more rapidly. However, if the market is poor, your life insurance policy death benefit will be poor. As with whole life insurance and universal life insurance, you may withdraw against the cash value. Be reminded that withdrawals of this life insurance policy will be deducted from the cash value.