The unpredictability of life and lack of surety mandates life Insurance on the life of the breadwinner to secure the family members’ futures. First, we need to understand what is life insurance. Life insurance offers financial security to the insured’s family in case of an accident or death of the policyholder. An insured or policyholder enters into a legal agreement with an insurer to provide life cover in any future unfortunate occurrence. The policyholder pays a certain sum of money, regularly known as the “premium”, to keep the policy valid for the uncertain future. The premium of the policy computed depends on factors such as age, health condition, gender, family history, lifestyle habits, occupation, and quantum of coverage.
In the event of the death of the earning member of the family, the policyholder’s nominee receives proceeds from the insurance policy to ensure the family doesn’t face any financial hardships. It is recommended that individuals should purchase an insurance policy when they are young for a beneficial premium. In this article, we will discuss what is life insurance and list down the benefits and features of purchasing a life insurance policy:
Under section 80C, the premium the insured taxpayer pays is subject to a deduction capped at Rs 1.5L per annum. The maturity proceeds received by the nominee are exempt under section 10(10D) subject to conditions such as the life insurance policy should be issued on or after 1 April 2012. Further, no exemption shall be available for any policy issued on or after 1 April 2023, and the premium payable doesn’t exceed INR 5 lakhs in any year.
The premium paid by the insured results in a lump sum pay-out from the life insurance policy in case of the policyholder or sole earning member meets an untimely death. The lumpsumpayment will be financial security for the remaining family members. Pay-out can be a single or regular payment that will provide a regular source of income.
Purchasing insurance policies is a low-risk investment as the premiums paid are returned to the family in a lumpsum payout in the event of the policyholder’s death. The payout is as per the terms of the policy.
Paying regular and timely premiums ensures that on maturity or in the event of an untimely death of the policyholder, the nominee or the family of the deceased policyholder will receive a lumpsum proceeds amount as proceeds. These proceeds will help the family in overcoming any financial hurdles. Retirement insurance plans offer multiple payout options such as lumpsum, installment basis or combined option.
The life insurance policies also offer additional riders that provide financial coverage if the death or accident happens under different scenarios. Including riders, it provides coverage irrespective of the reason for death, accident or disability.
Key things to note before buying a whole life insurance
The above should clarify to our readers what life insurance isand the various benefits offered. The types of policies offered by insurance companies are term insurance, unit linked insurance plans (ULIPs), endowment insurance plans, whole life insurance, money-back insurance, child insurance and retirement insurance plans. Selecting the maximum coverage amount to ensure complete financial security for your loved ones in our absence is essential.