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Life insurance plans are essential for anyone looking to secure their family in case of an unforeseen event. They help you secure your family’s financial future as well as achieve your lifelong goals. In this article, we will understand the benefits of a life insurance policy and the various characteristics of life insurance plans.
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Life insurance plans help secure your family financially, in case of your unfortunate death. All you have to do is pay your premiums for the policy term and during that tenure, if you suffer an unfortunate death, your family will receive the sum assured selected at the time of policy purchase. Broadly, life insurance plans can be categorized into two simple types:
Term Insurance Plans - Term life insurance plans are pure-protection plans that offer a death benefit in the form of a lump sum payment to your family/nominee in your absence at affordable premium rates. Term plans are the most efficient and affordable forms of life insurance policies and offer high life cover in low premium rates.
For example, Mrs. Pooja, a 33 year old non-smoking female, with annual income of 14 Lakhs, purchased a term plan of Rs. 1 Crore for her family’s financial security, so that when she dies, the family/nominees will get the claim amount after her death.
Savings Plan - These plans provide a guaranteed payout at regular intervals to meet your financial goals such as buying a house or paying for your child’s higher education while providing life-cover benefits.
For example, you wish to have a source of wealth creation after your retirement. In this case, savings plans are a great help, as they not just secure you financially, but also make sure you have a mode of saving money. ULIP is one such savings plan available in India that provides the dual benefit of wealth creation and life cover.
*Note: You can also learn about life insurance in hindi.
Term Plans
Here are the features of life insurance:
Financial Security: Life insurance provides money to your family after you pass away. It helps them cover expenses and maintain their quality of life.
Debt and Expenses: It can help pay off any outstanding debts, like a mortgage or loans, so your loved ones don't struggle with financial burdens.
Child’s Education: If you have children, life insurance can help fund their education even if you're not there to support them.
Peace of Mind: Knowing your family will be financially supported brings peace of mind, especially during difficult times.
Funeral Costs: Life insurance can cover funeral and burial expenses, easing the financial burden on your family.
Tax Benefits: You also enjoy life insurance tax benefit if you buy life insurance plans, under sections 80C, 80D, 10(10D) of the ITA, 1961.
*Note: It is advisable to first know what is term insurance and understand the features of life insurance, the additional riders, and exclusions before you buy term plan.
Now that you have understood what the features of life insurance are, let us see the various characteristics of life insurance:
Family’s Financial Protection: The primary purpose of life insurance is to provide financial protection to the insured person's family or dependents in the event of their death. The death benefit, paid to the beneficiaries, helps cover immediate and ongoing financial needs, including funeral expenses, outstanding debts, and children’s higher education and career, and daily living expenses.
Policy Term: Policy term is the specified tenure for which the insurance company offers a life cover and the term during which the contract is in force. You can select the policy term as per your requirement and stay covered under a life insurance plan for as long as you want. Several plans like No-cost Term Insurance Plans give you the option of canceling your life insurance policy at a specific age decided by the insurer and returning the premium amount paid until that point.
Premium Payments: Life insurance plans offer you life cover for the desired policy term in exchange for premiums paid on a regular basis. You can also select to pay the premiums in a single lump sum amount as a single premium or for a limited term. You can choose to pay your premiums at the frequency best suited for your lifestyle like monthly, quarterly, bi-annually, or annually.The premium amount depends on factors such as the insured person's age, health, occupation, lifestyle, and the sum assured. Premiums can be paid annually, semi-annually, quarterly, or monthly, depending on the policy terms and the policyholder's convenience.
Note: You can easily calculate the premium of your term insurance plan using the term insurance calculator
Wealth Creation: Various life insurance plans like savings plans help you grow your wealth over time with their investment (ULIPs) feature. The returns from these plans can be used to fund your child’s marriage, higher education, or your unexpected medical expenses in the long run.
Riders: Life insurance policies in India offer riders that can be added to the base policy for enhanced coverage or additional benefits. Some common riders include accidental death benefit rider, critical illness rider, waiver of premium rider, etc.
Assign Nominee: Life insurance plans provide you with the flexibility to assign and choose between your preferred nominees at any point during your life insurance term.
Claim Benefit: The family of the policyholder can file for a claim benefit in case the life assured suffers an unfortunate death during the policy tenure. The nominee will be eligible to receive the predetermined payout payable by the insurance company.
Tax Benefits: Life and term insurance tax benefits can be availed under the following sections of Income Tax Act of 1961:
Deductions under Section 80C: Premiums paid for keeping the life insurance policies active can claim tax deductions under Section 80C of the ITA. This provision allows individuals to claim tax deductions for the premium amount, subject to a maximum limit of ₹1.5 lakh per financial year.
Tax-exempt Death Benefit: The death benefit received by beneficiaries is exempt from taxation under Section 10(10D) of the Income Tax Act. This means that the entire amount received as the death benefit is free from tax obligations, providing substantial financial relief to the family or dependents of the insured individual.
Death Benefit: A life insurance plan will provide a lump sum death benefit to your nominees in case of your unfortunate death within the policy tenure. This amount can be used by your family to meet their financial obligations in your absence.
Maturity Benefit: In case you outlive the policy term then you will receive the sum assured as the maturity benefit, in case of a savings plan. Term plans conventionally don't offer any maturity benefit but several variants of term plans like Term Insurance with Return of Premium return the premiums paid during the policy term, at the end of the policy tenure.
To understand the various features of life insurance plans, it is also important to know life insurance meaning and why one should buy life insurance.
*Note: Always check the claim settlement ratio (CSR) of the insurance company for 5 consecutive years before buying a plan from them to be certain if they are reliable and trustworthy.
**You can get up to 30% more affordable prices than males on term insurance for women on Policybazaar, with an average of 15% more affordable rates.
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Now that you have understood what the characteristics of life insurance are, you can follow these steps to purchase a life insurance policy from Policybazaar:
Step 1: Visit Policybazaar’s website and click on Life Insurance.
Step 2: Select the type of life insurance plan you want to purchase i.e., term plan or investment plan.
Step 3: Fill in your basic details like name, date of birth, contact number, and gender.
Step 4: Answer the questions regarding your smoking and chewing tobacco habits, your annual income, occupation type, and qualifications.
Step 5: Select the life insurance policy most suitable for you and proceed to pay.
Before buying life insurance it is important to understand the characteristics of life insurance plans to make the most of your plans. You can go through the characteristics of term insurance listed above before purchasing the life insurance policy best suited to you as per your requirements from Policybazaar’s official page.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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