Insurance is one of the most important parts of financial planning as it can protect you and your loved ones from the costs that can arise from several uncertainties in life.
Life insurance is a legal contract between an insurer and policyholder. The life insurance company promises to pay a certain amount to the beneficiaries of the policyholder at the time of his death or after a set period. The life insurance sum is paid in exchange for a premium.
Why Do I Need a Life Insurance Policy?
Life is unpredictable and no one can ever tell what is coming next. Our lives are likely to be affected by losses, demise, or disability due to unforeseen accidents or natural phenomena. So having a life insurance policy can shield you against such contingencies. Moreover –
- If the sole bread earner of a family passes away, a life insurance policy ensures financial support to his family.
- It can also fund educational expenses and other needs of the policyholder’s children.
- It can also provide a steady income after retirement.
- Basically, it can provide relief against any financial contingency or some other requirement.
How Much Coverage is Needed?
How much life insurance cover is needed depends upon the person’s age, source of income, number of dependents, liabilities, and so on. It should be enough to support the family today or tomorrow.
Many of us are unaware of the fact that a life insurance policy can act as loan collateral, too.
Also, the policyholder is eligible for a tax rebate under Section 80C of the Income Tax act for paying the premium of a life insurance policy. This benefit is for all, be it the private sector or public sector.
Categories of Life Insurance
Term Life Insurance
Term Life Insurance covers a fixed period of time and promises to pay the beneficiary a sum of money upon the policyholder’s demise. Term Insurance policies are the most affordable policies to choose from as they have lower premium costs. Anyone who wishes to buy a term insurance policy must be between 18 years to 65 years of age.
This type of insurance is highly flexible. The policy can be renewed without undergoing medical examination. Also, there are a few insurance companies that offer a tax benefit to the insured. However, if the insured outlives his tenure, he would not be receiving any benefit even if he has paid the premium.
Permanent Life Insurance
Permanent Life Insurance, mainly whole and universal policies, offer lifelong coverage. Unlike term insurance, permanent life insurance allows one to gather a ‘cash value’ against which one can take loans. However, permanent insurance is more costly compared to term insurance.
Some Commonly Asked Questions
Here are some commonly asked questions on Life Insurance Planning –
- Can a life insurance policy be claimed before death?
Yes, depending upon the cash value of the policy, the policy can be cashed in.
- In case, the policyholder passes away in a foreign country, will the nominee get the benefit?
Yes, the nominee will get the benefit.
- How long does it take to get the life insurance after the policyholder’s demise?
It takes at least 10-14 days if all the documents of the claimant are in order.
- What if someone outlives the policy tenure?
In case, the policyholder outlives the policy, no survival benefit is provided to him.
- What if someone stops paying their premium?
The policy will lapse after the end of the grace period.
To determine the best life insurance policy according to your needs, book your free consultation with us now.