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What is Life Insurance?


Life Insurance helps a person financially in case of death of the insured. Apart from death benefits, it also provides financial stability if the person survives till maturity.

 One needs an umbrella to protect them from rain; similarly, we need Life Insurance for protecting ourselves from financial burden in times of need.


Life Insurance is anagreement among insurance policyholder and insurer, wherein life insurance pays a specific amount to the nominee. The question is, how will they getthat amount? The answer is they need to pay a specific amount as premium within the duration as mentioned in the plan. The nominee gets the sum assured payout if the insured dies during the term. And if the insured person survives the tenure, will get the survival benefits.

Moreover, in case one opts for the plan that includes critical illnesses or terminal illnesses, that would also be included in the death benefit if the life assured dies due to such illnesses. Life Insurance also offers savings plans, in which one could save a certain amount and receive it after the tenure.

It provides various benefits like risk coverage, covering health expenses, savings, income, pension, loan facility and tax benefits for those who opt for the plan.

Three essential components of life insurance are:

a)      Death Benefit:

In this, a life insurance plan offers death benefits to nominee when there is a death of the life assured.

b)      Premium Payment:

Depending on the cost of insurance and many other factors, this policy is determined. It may also include factors like age, medical history, personal risks or occupational hazards

c)      Cost Value:

Cost value includes savings account which could be used throughout during life of insured, wherein the cash is gathered on the basis of tax-deferred. Cash value also provides insurance benefits.

Life insurance plans include various types:

i)                    Term Insurance Plan:
Term Insurance Plan is basically in case of unfortunate death of the insured person which is purchased in the tenure of 10, 2 or 3 years. There are no maturity benefits offered through this plan.

ii)                  Endowment Plan:
Endowment policy also offers death benefits, but it also provides a maturity amount, in case the insured survives.

iii)                Unit Linked Insurance Plan:
In this, the insured could get death benefit along with the right amount of wealth that gets accumulated depending upon the market.
iv)                Whole Life Policy:
This policy, as the name suggests, is for the whole life. It also provides survival benefits. Partial withdrawal is possible.

v)                  Money Back Policy:
In this policy, a specific amount is received proportionally within the duration of the policy term.

vi)                Pension Plan:
This policy provides pensions after a particular duration, which could be used during retirement.

The claim settlement process, in the case of Life Insurance, is simple. One needs to submit claim intimation formto an insurance company. It should have details such as to cause of death, date and place. Documents to be submitted along with claim intimation form are a death certificate, insurance policy copy, legal evidence of title (in case of the beneficiary not added) and assignment deeds. After verification of all these documents, the claim would be settled.

There are many points that are to be considered before purchasing a Life Insurance:

a)      Research on the Life Insurance policy to avail excellent benefits and take the decision to buy a plan as per your requirement.

    b)      Keep in mind your lock-in-period which will help you to change your insurance policy usually within 15 days, if in case you did not like the policy

    c)      Choose your premium payment method either yearly, half-yearly, quarterly or monthly as per the plan specified in the policy     

    d)     Don't try to hide any information while filling the insurance application form. If the wrong information is provided, it could affect claims.

There are various life Insurance companies like LIC, SBI, ICICI, Bajaj Allianz, HDFC, Max Life, Birla Sun, Kotak,etc.

Life Insurance safeguards our family in times of need by providing financial help, so this small investment should never be ignored. We can't change the future, but definitely, we can care for our future.
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