Life insurance has become essential for the individual. In the case of the passing away of an individual, life insurance can play a crucial role in shaping the lives of the beneficiaries. The beneficiaries can use the amount to help cover essential expenses, such as paying a mortgage or college tuition for children.
As we know that Life Insurance is a contract between an insurance policyholder and an insurance company, where the insurer promises to pay a sum of money in exchange for a premium after a stipulated period or upon the death of an insured person.
A life insurance policy is a mutual contract between the individual (insured) and the insurance company. The insurance company guarantees compensation for loss of life to the relatives of the insured. According to the insurance principle, the beneficiary whose name has been mentioned in the contract receives the amount from the insurance company in the case of loss of life.
Insurance Institute of India (III) Conducts IC02 – LICENTIATE – Practice of Life Insurance exam for better understanding of the subject between students
Benefits of Life insurance
The benefits of buying Life Insurance Policies are as follows:
- Life Insurance policy assures the insured of a guaranteed sum to the nominee of the insured in case of death otherwise it provides survival benefits to the insured.
- A life insurance policy saves our money and gives us long term benefits by giving us a certain rate of interest.
- Insurance companies have different plans and the persons can select according to their needs and capacity from the various options.
- Insurance companies may also provide a loan to their customers if the customers want to borrow a certain amount. The loan is provided on selected policies.
- Under section 80C of the income tax Act, 1961 insurance premium is tax-deductible and the insured can get a rebate on it.
Type of Life Insurance
Generally, there are 6 kinds of life insurance policies
- Term Life Insurance policy: These kinds of life insurance policies are very popular among people.
Generally, such policies are for the period of 5 to 30 years. In this, the sum assured is payable to the nominee in case of death of the policyholder
- Endowment policy: Such kinds of policies are also popular among the people. It provides protection as well as investment to the policyholders.
- Money-back policy: In the money-back policy, the policyholder is entitled to receive a certain amount from time to time. Money back policy is generally taken for a period of 10 to 25 years. Survival benefit is paid to the policyholder on the maturity.
- Whole Life Policy: This kind of policy covers the whole life of the policyholder. Its duration may be longer from 20 to 30 years. . Sum assured is paid to the nominee, in case of the death of the policyholder.
- Pension Policy: It is very popular among the people who want to have a regular income source post-retirement. It does not give a higher return on investment but certainly, it provides a kind of satisfaction to the policyholder. In this category, premiums are mostly high priced.