Life insurance is a commercial contract
between the insurance policy proposer and the insurance service provider.
However, apart from customized plan of insurance policy and its coverage, there
are wide ranges of insurance policies available in market under different
flagship brands. Although the aim of all insurance policies are almost the
same, which is providing best quality life coverage and return value of
investments in the form of premium, it is extremely essential to learn the
basic details about the life insurance plans and the coverage provided by these
plans.
Depending on the
major aim behind taking these policies, there are two basic variants:
§ Protection policies - are mostly known as term
insurance, the benefit of these insurance policies involve a lump sum amount
against the death of the proposers.
§ Investment policies – where the chief objective of the
insurance policies is to assist the increase of capital by recurring/regular or
single premium; whole life, variable life, and universal life policies are
included in investment life insurance policies range.
The Inherent Policy of Life Insurance
Life insurance policy is meant for life
coverage. Although in all sense human life is priceless, but when a bread
earner of a family passes away all on a sudden it simply creates a catastrophe
that is hard to withstand for rest of the family members. The coverage of life
insurance cannot bring back the life but can protect the family with financial
security and ensures safety of them. Hence availing life insurance policy is no
doubt an extra protection for an individual and for his/her family in dire
distress and in case of life penalty even.
Why to Buy Life Insurance Scheme
Security and safety are the two primary aims
behind availing life insurance schemes. In some cases it is the initiative to
protect kids and family in case there is any death or dire accident causing
disability, etc. Insurance policy can help in two extreme conditions where an
individual lives too long or dies too early. To prevent this kind of distress,
life insurance policies are taken for ensuring extra protection.
§ A life insurance policy provides
excellent financial support for a family where the bread earner or a
significant earning member has suffered from death penalty
§ An apt children’s policy can finance
child education and other financial needs of the family
§ Availing a life insurance savings
plan helps in creating a consistent flow of income in post retirement period.
§ Creating extra income for improving
life style
§ Managing finance portfolio better
§ Availing increased income tax
deduction out of availing insurance policy
Life Insurance Cover: How much is
Required
The actual level of cover that can be
considered adequate is a highly fluid and dynamic figure as it changes from
time to time and is also different for different individuals depending on their
personal situations. However, the factors, which are to be taken in
consideration, are,
§ The number of dependants
§ The number of liability and
responsibility of mortgage
§ The standard of living a family is
leading
§ The plan for children education
§ General health of the family members
§ Detail analysis of the affordability
§ Detail analysis of the standing
asset and asst liabilities
§ Forecast rates of inflation
§ Forecast cost of living to maintain
the current standards.
Types of Life Insurance Available
Currently the public and private players in
the life insurance industry of India are offering a array of life insurance
products with a host of benefits for the policy buyers. Some of the basic types
of policies available in the Markey are listed below.
§ Pure Term Insurance Policy: is a
basic risk cover policy which protects the life insured for a pre-determined
period of time as stated in the contract.
§ Whole Life Policy: is a basic risk
policy that provides cover throughout the life of the insured irrespective of
any time fame.
§ Endowment Policy: Is a policy that
combines insurance cover along with savings for the insured.
§ Money Back Policy: is a policy in
which periodic payments of certain sum assured are made to the policy holder.
In case the policy holder survives the term then the balance of the sum assured
is paid to the insured.
§ ULIP:
is a market linked policy that provides basic life cover along with a host of
investment options for creating better returns.
§ Annuities and Pension: are policies
that provide the insurer with stipulated sums periodically to protect against
financial risks and give pension at regular intervals.
Life
insurance is an essential ingredient to any kind of personal financial planning
as it caters to the basic issue of security for the dear ones. Seeking
professional help while deciding on the type and amount of life insurance is a
smart way for beginners as it will help them appreciate the various nuances of
plans and policies available in the market currently. A little research on the
internet will also provide detailed comparative studies from all desired angles
regarding the various policies along with the associated benefits and pitfalls.
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