What are Life Insurance Features and Benefits?: Life insurance can be described as a contract between the insurance company or policy provider and the policy buyer. In exchange for premium payments, the insurance provider guarantees individuals to pay a death benefit to the nominee or beneficiary of the insurance policy in the event of the untimely death of the insured.
Life insurance provider has become increasingly popular to ensure the financial security of policy buyer’s family in the event of their death. With the availability of different life insurance plans in India, finding the right insurance policy for one’s needs can be overwhelming. However, by understanding the basic features and linked benefits of insurance can help them make an informed decision.
To give you the required jump start, we have discussed the key features and benefits of popular life insurance plans below. Read along to know more.
Benefits of Life Insurance Policy
The following are the major benefits of a life insurance plan –
A life insurance plan extends comprehensive risk coverage, which is paid to the nominee or beneficiary of the policy as monetary compensation. This monetary compensation is paid in exchange for the regular premiums paid by the insured. The risk coverage provides financial security for the insured’s family members and helps them maintain their overall financial stability. This aspect makes it crucial for individuals to choose the best of life insurance plans with comprehensive coverage.
Some life insurance plans also help cover health expenses, including the cost of hospitalization and critical disorders. Individuals can pick a health coverage plan based on their personal needs and requirements. However, it is imperative to understand the scope of insurance coverage and the illnesses covered under the policy to determine whether the plan is the right fit or not.
Every leading life insurance policy extends a guaranteed sum or sum assured in the event of the occurrence of the covered incident. This guaranteed amount is paid to the nominee or beneficiary of the insurance policy in the event of the insured’s sudden death or to them in case of accidental injury or disability.
Some life insurance plans allow policyholders to borrow against their paid premium amount. However, this feature is available for only certain plans and is bound by specific terms and conditions.
One of the main advantages of getting a life insurance policy is the accompanying tax benefits. Under Section 80C of the Income Tax Act, of 1961, life insurance premiums are deemed eligible for tax deductions. Policyholders can raise a claim to avail of a deduction of up to Rs. 1.5 lakhs in a given fiscal year against the premiums paid.
Individuals can claim applicable tax deductions on the life insurance policies taken in their name, their child’s name, or their spouse’s name. Hindu Undivided Families can also claim a tax deduction on their life insurance, which is taken in the Karta’s name.
Types of Life Insurance Policies
These are some of the most popular insurance policies in India –
Term Insurance Plan
Term insurance plans are popular life insurance policies and they come with a fixed term, ranging 10, 20, or 30 years. These policies do not attach any cash value, so they do not provide any cash benefits during the active policy term. This makes the term insurance plan cheaper than all other types of life insurance. The term insurance benefits are paid only if the insured dies unexpectedly during the policy term.
Money Back Policy
This insurance policy pays a portion of the sum assured to the insured at regular intervals throughout the active policy term. This trait makes them quite similar to endowment insurance policies but with the added benefit of disbursing regular payouts.
Whole Life Insurance
This life insurance plan provides coverage for the entire life. It also offers policyholders the option to withdraw a part of the sum insured during the insurance policy’s active term and to borrow against the sum insured.
Endowment insurance policy provides policyholders additional benefits, such as survival benefit or a lump sum payout, if the insured outlives the plan’s maturity date.
Unit Linked Insurance Plans
ULIPs are well-known insurance plans because they offer dual perks of life insurance and the chance to build and accumulate wealth. The premiums paid for a ULIP are typically split between the life insurance component and investment. This insurance plan also allows the insured to make partial withdrawals from paid premium corpus, making them a reliable source of emergency funds.
An annuity is a preferred financial product for retirees that guarantees the annuitant a regular income for a specified period or the rest of their lifetime. Typically, the buyer pays a premium to the insurance provider. The premium amount is invested and used to pay regular income payouts to the annuitant, making them suitable for retirement planning. Usually, annuity payments are paid in several, such as annually, semi-annually, monthly, or quarterly. The annuitant also has the option to receive a lump sum payout instead of receiving regular payments.
Things to Check When Looking for a Life Insurance Policy
Individuals should check these points and weigh their merit when looking for an insurance policy –
- Read the life insurance terms and exclusions carefully
- Check the accompanying lock-in period of the insurance plan
- Check the sum insured or sum assured
- Find the payment options
- Check the list of coverage
- Find out all the exclusions of the policy
- Find out the insurance provider’s claim settlement ratio
- Analyze the claim settlement process
- Check the complete list of eligibility criteria
It is extremely important for individuals looking for a life insurance policy to understand the coverage and limitations of an insurance policy before buying one. However, they should also be honest and transparent about their current medical conditions and personal history when getting an insurance plan to avoid the chance of any problems or delays when raising a claim process.
They should also provide all required documents and details to ensure smooth claim processing and approval.