Human life is uncertain. Even though the risks to human life have reduced with the advancement of technology, hundreds still meet a premature death on a daily basis. The loss of a bread-winning member can deal a body blow to the entire family. The loss is emotional as well as financial and many families fail to recover from the financial impact. The emotional loss cannot be compensated but the financial loss can be mitigated to an extent. Life insurance plans can help one secure the financial future of his/her family. The pay-out from life insurance plans can be used for income replacement, which can be of immense importance for the financial well-being of the family.
What is life insurance?
Life insurance is a contract between an individual and a life insurance company under which the insurance company is legally bound to pay out an amount to the person nominated by the policyholder in the event of his/her death. The insurance company will have to honour the contract and pay the amount only if the policyholder pays all the premiums on time. The premiums can be paid as a lump sum or in equal instalments, depending on the policy terms and conditions and the chosen premium payment frequency. A typical life insurance plan pays the nominee of the policyholder only after his/her death, but some policies also pay if the insured outlives the policy. There are hosts of life insurance plans available in India. Some just provide death benefits, while some offer maturity benefit along with the life insurance cover.