Insuring your life is the right way of gaining protection for your family members and their future. The idea of a life insurance policy stems from the fact that life goes on for your dear ones even after your demise. The coverage provided helps you fulfil your financial responsibilities no matter what happens.
Life is precious and unpredictable. So, when you start insuring your precious possessions, you should start with life insurance coverage. In case of an unfortunate incident, the life insurance policy will help take care of your family’s financial emergencies and needs. If you take a planned approach to life, a life insurance policy is your way of staying prepared for the unexpected.
Common Features in life insurance policies
There are some important features and terms related to your life insurance policy that you should know about. If your question is ‘what is life insurance‘, the following points can define it for you.
Policyholder
The policyholder or the insured is the person who has bought the life insurance policy and pays the premium. The policyholder is the direct beneficiary of the policy benefits.
Maturity
Maturity is the date on which the policy term is completed. After the maturity period, the contract term of the life insurance policy ends.
Premium
A premium is also called an insurance premium. This refers to the amount you must pay regularly for the life insurance coverage.
Sum Assured
The sum assured is the amount of money that you get at the end of the policy term. It could also refer to the money the dependents or nominees get from the life insurance policy when the insured passes away.
Policy Claim
Policy claims are used for every type of insurance including life insurance. For example, you file a claim on the life insurance policy after the insured’s demise so that the company pays you the sum assured and other bonuses.
What are the Benefits of life insurance policies?
There are many types of life insurance policies that you can browse through before selecting a suitable one. The most common life insurance policy types are as follows:
Tax-Free Payouts
As a tax-paying citizen, you would wish to save money on the amount you pay as taxes. Insurance payouts are tax-free, and your beneficiaries can keep the entire amount for their financial needs. Life insurance payouts are not considered as income of beneficiaries. So they can enjoy the full financial benefits of life insurance coverage.
Financial Support to Family Members
The main reason for buying life insurance coverage is the benefit of financial support to your family members. Ideally, the life insurance coverage should be seven to ten times your annual income. When the coverage is comprehensive, your family members will be able to fulfill their financial needs in the future.
Even after you pass away, your life insurance policy will be able to provide money to your family members for their major living expenses. These expenses could be related to daily purchases or high-end goals like a college education or marriage.
Covers Final Rites Expenses
In a time of grief, money will be the least of your family’s concerns. You need to take up a life insurance policy to save them from a financial crisis at an emotionally difficult time. A life insurance policy helps your family complete your final rites smoothly after death. Taking a life insurance policy could be the closest you can come to planning for an untoward happening like death.
Types of life insurance policies
There are many types of life insurance policies and these are as follows:
- Term Life Insurance
The term insurance plan provides financial security to family members after the insured person’s death.
- Whole Life Insurance
The whole life insurance plan is perfect for people who expect to live a long life until the late 90s.
- ULIPs
ULIP plans combine life insurance coverage and market investments for wealth creation.
- Endowment Plans
Endowment plans combine life insurance coverage and financial savings for the later phase of your life when you retire.
- Annuity Plans
Annuity plans offer regular income to retired policyholders even after their primary source of income is drained.
Final Thoughts
Depending on your financial goals and the way you want to spend the latter part of your life, you should choose an optimal life insurance plan. You need to go to a reputed insurance provider or agent to find the best policy for your needs.
A life insurance policy is a financial weapon in the face of unforeseen circumstances. While you cannot avoid the challenges life throws your way, you can definitely insure the risks that you and your family face. Get insured today!
