What is life insurance?
It's critical to protect your family's financial future, especially if you're the household's sole or principal breadwinner. Life insurance ensures that your family is financially protected even if you are not present. Life insurance is a financial safety net for you and your loved ones. It assures that you and your loved ones are always supported financially.
How does life insurance work?
- A life insurance policy is a contract between the policyholder and the insurance company that promises the insurer will pay the nominee a predetermined amount if the policyholder pays all of the policy premiums on time. The predetermined amount could be the maturity amount paid at the end of the policy term or the death benefit paid if anything tragic occurs during the policy term. All of the advantages of a life insurance policy are dependent on the payment of premiums, which is why a premium that suits your requirements should be chosen.
- The insurance company pays the sum assured to the nominee in the event of the insured's untimely death. The claim procedure is straightforward; the insurance company must be notified as soon as possible following the insured's death. The claimant must complete a claims form and submit it along with the necessary documentation, such as a death certificate. The claim is verified by the insurance company, and the benefit is released.
- The insurance company may decide to investigate the claim in particular instances. You will need to supply more documentation, and the claim settlement process will take a little longer in such cases. Insurance claims are sometimes denied by insurers. Rejections can occur for a variety of reasons, including but not limited to concealing information while purchasing the policy, providing fraudulent information, and policy lapse.
Advantages of Life insurance
There are numerous advantages to getting a life insurance policy.
• Financial Security/Peace of Mind
Having life insurance gives you the greatest sense of security. This is because if someone passes away, they may rest assured that their family and loved ones will be financially secure. We all have financial obligations but having enough life insurance ensures that your debts are covered and loved ones are financially protected in the event of your untimely death.
• Creating Wealth
Some types of life insurance policies also give you the chance to build wealth. Apart from providing life insurance, these policies invest your premium in a variety of investment classes to provide market linked returns and help you build your savings.
• Savings on taxes
Life insurance policies have two tax advantages. The premiums paid are eligible for a tax deductible under Section 80C of Income tax Act 1961, subject to provisions stated therein. Currently, you can deduct up to 1.5 lakh in premiums from your gross income each year, cutting your tax bill. The maturity insurance plans, on the other hand, may be completely tax-free. This tax benefit is provided under Section 10(10D) of Income tax Act 1961, subject to provisions stated therein.
• Purchase when you're young and save more
Life insurance products allow you to lock in inexpensive premiums while you're still young. You may have to pay a much greater premium if you buy the same insurance when you are older, than you would, if you bought it when you were younger.
Different life insurance policies operate in a variety of ways. A ULIP has multiple factors, whereas a term insurance plan is basic and easy to understand. Different investment funds, as well as a variety of portfolio management methodologies, must be considered while buying a ULIP. Term insurance, on the other hand, provides only protection and does not include any investment component.