What is Life Insurance?
An agreement for life insurance is made between the insured and the insurer. A life insurance policy guarantees that the insurer will pay a specific sum to chosen beneficiaries after the insured passes away in exchange for the premiums paid by the policyholder over the course of their lifetime. |
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The life insurance application must precisely list all of the insured's past, present, and high-risk behaviors in order for the contract to be enforceable.
Features of Life Insurance Plans?
- Premium
- Policyholder
- Maturity
- Sum Assured
- Nominee
- Insured
- Policy Term
- Claim
Premium
A premium is a cost a policyholder incurs to have their life insured.Policyholder
The term "policyholder" refers to the individual who pays the life insurance premium and signs a contract with a life insurance company.Maturity
The life insurance contract terminates when the policy term or maturity date passes.Sum Assured
The life insurance contract terminates when the policy term or maturity date passes.Nominee
A nominee is someone whose name is on the life insurance policy and who, in accordance with the provisions of the policy, is eligible to receive the predetermined amount.Policy Term
According to the terms of the life insurance contract, the policy term is the time frame for which the insurance provider will provide a life cover and during which the contract is in force (listed in the life insurance contract).Insured
The individual whose life is protected by life insurance is known as the insured. After the insured person passes away, the insurance company must pay the dependents.Claim
When the insured passes away, the nominees may make a claim with the insurance company in order to receive the predetermined payout sum. |
| Types of life insurance |
Types of life insurance?
- Term Plans or Term Life Insurance
- Endowment Principle
- Complete Life Insurance
- Retirement Strategy
- Money-Back Guarantee
- Plan of Unit-Linked Insurance (ULIP)
1. Term Plans or Term Life Insurance
The most widely used kind of life insurance is the term. Most people agree that term insurance is the purest and most straightforward type of life insurance. If the life insured passes away during the term of the policy, term insurance provides a death payment to the beneficiary.The least expensive kind of life insurance is the term. A term insurance plan's large level of coverage supplied at incredibly low premium rates is its most distinguishing characteristic. As a result, it is less expensive than other kinds of life insurance coverage.
Term life insurance typically does not provide maturity benefits. However, some term plan types also provide benefits at maturity, such as term plans with return of premiums (TROP) if the policyholder lives longer than the policy term.
A term plan's coverage can also be increased by selecting extra riders, such as Accidental Death Benefit or Child Support riders.
2. Endowment Principle
A type of life insurance policy known as an endowment policy serves as both a means of insurance and savings. Even if no claim has been made, endowment plans seek to offer maturity benefits to the life insured in the form of a lump sum payment at the conclusion of the policy term.For those who want the highest coverage possible together with a sizeable savings component, an endowment plan is the best type of life insurance. Even as they provide their family with financial security, they aid the policyholder in developing the habit of saving.
Endowment plans can be broadly divided into two categories: profitable and non-profit. Depending on their level of risk tolerance, policyholders can pick between these two types.
3. Complete Life Insurance
Whole life insurance is a type of life insurance that provides protection up until the policyholder's demise. Depending on your financial needs and risk tolerance, you can choose a participating or non-participating whole life insurance policy.Read more...
Even if the premiums for participating whole life insurance are greater in comparison, the policyholders receive dividend payments on a regular basis. A non-participating policy has reduced premium rates, but the policyholder typically cannot take advantage of monthly dividends.
4. Retirement Strategy
A retirement plan is a sort of life insurance that emphasizes giving you stability and security financially once you retire. Your regular source of money from your job ends when you retire.A reliable source of consistent income can be produced by investing in retirement plans. If you keep investing until you reach retirement, the plan will assist you in covering your expenses.
5. Money-Back Guarantee
A money-back policy, one of the best kinds of life insurance, provides policyholders with Survival Benefits at regular intervals in the form of a portion of the total sum assured. The remaining portion of the Sum Assured is given to the policyholder after the policy reaches maturity.In contrast, if the policyholder passes away during the period, their dependents will get the whole Sum Assured, without any reductions.
6. Plan of Unit-Linked Insurance (ULIP)
A sort of life insurance product that provides both investment and life insurance is known as a unit-linked insurance plan, or ULIP. Due to their adaptability, ULIPs are among the most well-liked sorts of life insurance policies that are offered. The premiums paid for ULIPs are divided into two parts:one portion is used to ensure insurance coverage, while the other part is invested in a variety of financial products, such as market-backed equity funds, debt funds, and other securities. Since investors can quickly swap or reroute their premiums between several funds, ULIPs are incredibly versatile financial products.
Since their proceeds are exempt from LTCG, ULIPs are also promoted as having a tax-saving advantage over other market vehicles (Long Term Capital Gains).
How Does Life Insurance Work?
The sum of money required to maintain the policy in effect is known as the premium. The majority of companies give a discount for paying premiums annually, and premiums can be paid monthly, quarterly, or yearly. |
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A grace period, which is a predetermined number of days after the payment due date during which the policyholder may make a payment without the policy lapse, is another feature of some plans.
Other types of life insurance?
- Life insurance on credit
- First-to-die
- Second-to-die
- Life insurance for groups
- Life insurance for mortgages
Life insurance on credit
A specific loan, such as a home equity loan, has its remaining balance paid by credit life insurance. When you take out a loan, your bank might offer to sell you a credit life insurance policy. If you pass away, the loan is repaid to the lender, not your family.First-to-die
following the passing of the initial policyholder. After that, the insurance would no longer cover the second person and would expire. Because there is little demand for these plans, they are relatively uncommon.Second-to-die
pays after the passing of both policyholders. After the deaths of both policyholders, these policies may be used to pay estate taxes or for the support of a dependent.Life insurance for groups
Employers frequently include group life insurance in their package of employee perks. Premiums are determined by the entire group rather than by each person. |
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Employers typically provide bare-bones coverage without charge, with the opportunity to get additional life insurance if you require extra protection.
Life insurance for mortgages
Mortgage life insurance pays out to the lender, not your family, in the event that you pass away, covering the remaining sum of your mortgage.10 benefits of life insurance?
- A life insurance policy is a legally enforceable arrangement that pays out to the policyholder in the event that the insured perishes.
- Life insurance coverage cannot be maintained unless a single premium is paid upfront or recurrent premiums are paid over time.
- A life insurance policy is only as stable financially as the company that issues it.
- Upon the death of the insured, the policy's face value or death benefit will be paid to the chosen beneficiaries.
- State guarantee funds may pay claims if the issuer is unable to.
- Permanent life insurance policies remain in effect indefinitely, or until the insured person dies, the premiums stop, or the policy is canceled.
- Term life insurance policies have a predetermined expiration date in years.