Everybody hopes for the best, but it is always better to prepare for situations that might not be ideal. This is why a backup in any situation continually helps. This is especially true for life. A life insurance plan can suggest financial support to your loved ones in your absence. Keep understanding to find out how. A life insurance policy is a contract between a policyholder and an insurance company. In a life insurance policy, the insurance company has the potential to pay a sum of money to the loved ones of the policyholder in case of death of the policyholder throughout a certain period. In return, the policyholder pays a small premium to the life insurance company.

In certain types of policies, the policyholder can likewise opt for critical illness benefits or choose additional protection to cover, contrary to an unfortunate event due to an accident. Read more about these features and types of life insurance policies below.

Benefits of Life Insurance Plans

Life insurance in India can play a grave role in your life. It can help you in diverse financial situations and offer the following advantages:

Act as loan collateral

A lot of loan providers ask for collateral when sanctioning a loan. A life insurance plan can be used as collateral for secured loans. This can help you get a loan through a favorable rate of interest in your hour of need.

Online payment discount

Life insurance plans offer online discounts from time to time. If you purchase a plan online, you can enjoy a discount on the premium. Some strategies may offer a discount if you make the payment through a specific bank.
Discount based on payment periodicity.

Life insurance plans let you choose the premium payment method. Characteristically, the premium can be paid in half-yearly, yearly, or monthly installments. Each of these methods can provide you with single discounts. You can find out more about them from the insurance company and pick an option that lets you save the most.

Tax benefits

A life insurance policy can help you save a lot of money that would otherwise be spent on taxes. You can claim a deduction of up to ₹ 1.5 lakh in a financial year under Section 80C of the Income Tax Act, 1961, on the premium paid towards a life insurance plan. In addition to this, the payout received for your life insurance policy is tax-free, subject to conditions agreed under Section 10(10D). COMP/DOC/May/2022/275/0381

How Does Life Insurance Work?

Life insurance is a legally binding contract between the insurer and the policyholder that offers financial safety to the policyholder’s loved ones. The policyholder purchases the life insurance by paying a premium. In the event of the policyholder’s passing during the policy term, the insurer provides a prearranged death benefit to the nominee, often a loved one.

Who can purchase a Life Insurance Policy?

Life insurance in India is a vital fiscal tool to have for all age groups. A life insurance policy can provide your loved ones with financial support as well as offer you satisfactory returns that can be used to plan for various individual goals. Apart from the age groups mentioned above, there are several additional types of people who can benefit from a life insurance plan. These include the following:

• Smokers: Smokers can be prone to health issues. Purchasing a buy life insurance policy can ensure sufficient financial guard for their loved ones. However, smokers must inform the insurer of their lifestyle habits before purchasing a plan.
• Disabled individuals: Disabled individuals can also benefit from a life insurance plan. However, it is necessary to undergo some medical tests before buying a fit insurance plan.
  People with pre-existing medical conditions: Individuals with pre-existing medical concerns can enjoy financial security with life insurance. But, it is vital to share the details of such medical conditions with the insurer.

Things to Consider Before Selecting Life Insurance Cover

Goals

Before you buy a life insurance cover, make a note of your goals. Every person has diverse life goals. While you may want a life insurance plan that would protect your family, someone else may be looking for a plan to invest in for their retirement. So, assess your goals and then pick a plan that offers the most benefits according to your goals.

Oldness

Your age and health can play a crucial role when you aim to buy a life insurance policy. The cover, in addition to premiums, is largely dependent on these two factors. The younger you are, the easier it is to buy life insurance, as you would be comparatively healthier. You can also get a low premium at a young age. Hence, it is recommended that you buy a life insurance policy as soon as possible.

Financial liabilities

The responsibility to pay back your debt and other liabilities may fall on your loved ones when you are no longer around. If you have any pending loan repayments or credit card dues, you must take them into account when deciding on the life cover amount. Picking a sufficient sum assured is vital so your family can repay your dues without any hassles and continue to live a dignified life.

Regular source of income

Life insurance policies can offer a regular source of income to your nominee. This money can act as a substitute for your income and help them cover day-to-day expenses as well as any unexpected emergencies. Life insurance plans can offer a regular stream of income to the families of both self-employed and salaried individuals.

Claim in case of death

In case of an untimely death of the insured, the nominee can follow the steps given below to raise a life insurance policy claim:

• Inform the insurer of the unfortunate event using any one of the methods mentioned above – website, call, email, or in-person.
• Submit all necessary documents like the death certificate, hospitalization documents, and others. KYC proofs of the nominee, like an Aadhaar card, PAN card, or any other required document. FIR papers in case of suicide or accidental death and a canceled cheque.
• The insurance company will review the documents and issue the settlement

What are the Types of Death Not Covered in Life Insurance?

The following types of death are not covered in a life insurance policy:

• Suicide: Deaths due to self-inflicted harm or suicide within a specified duration from policy inception or revival are not covered.
• Homicide involving the nominee: Deaths resulting from homicides where the nominee is involved may not be covered.

Key Takeaways

There is a life insurance plan for every conceivable financial goal. If you are looking for a simple cover to shield your loved ones against financial risks, choose a term plan. Whole life Insurance plan proposals life insurance coverage to the life assured for the whole life. For those looking for a combination of insurance and investment occasion, a Unit-linked insurance plan (ULIP) is the ideal choice. If you want insurance and the comfort of savings, select an endowment plan. Periodic earnings with an insurance cover can be realized from a money-back plan. A child plan is the right choice to fulfill your child’s life goals like education, marriage, etc. Plan your departure and retire gracefully with a retirement plan.