LIFE INSURANCE – MEANING, BENEFITS AND TYPES
Life insurance is an arrangement between the insurer and insuree, in which the insurer guarantees of compensation for loss of life of insuree in return for the payment of a specified premium. Life is beautiful, but also uncertain. Whatever you do, however smart and hard you work, you are never sure about what life has stored for you. So, it is important that you do not leave anything to chance, especially “ Life Insurance”. As death is the only certain thing in life, it is important that every person should get insured before any unfortunate.
Benefits of Life Insurance:-
- Risk Coverage:- Life insurance provides risk coverage to the insured family in the form of monetary compensation in lieu of premium paid.
- Different Plans For Different Uses:- Under Life Insurance, we can easily get different types of plans according to our specific requirements.
- Coverage For Health Expenses:- Life Insurance also covers hospitalization expenses and critical illness treatment.
- Helps in Promoting Savings:- Life insurance also has some saving plans in which the companies do invest a client’s money in profitable ventures.
- Guaranteed Income:- Life insurance policies come with guaranteed sum assured amount which is payable on the occurrence of an event.
- Loan Facility:- Insurance companies provide the option to the insured person that they can borrow a certain sum of amount.
Types of Life Insurance Policies
- Term insurance plan:-
As the name says Term insurance plans are those plans which are purchased for a fixed period of time, like 10, 20 or 30 years. As these policies don’t carry any cash value and any maturity benefits, hence these policies are cheaper as compared to other policies. This policy turns beneficial only on the occurrence of the event.
- Endowment policy:-
The only difference between the term insurance plan and the endowment policy is that endowment policy comes with the extra benefit that the policyholder will receive a lump sum amount in case if he survives until the date of maturity. Rest details of term policy are the same and also applicable to an endowment policy.
- Unit Linked Insurance Plan:-
These plans offer policyholders to build wealth in addition to life security. Premium paid into this policy is bifurcated into two parts, one for the purpose of Life insurance and another for the purpose of building wealth. This plan offers partially to withdraw the amount.
- Money Back Policy:-
This policy is similar to an endowment policy, the only difference is that this policy provides many survival benefits which are allotted proportionately over the period of the policy term.
- Whole Life Policy:-
Unlike other policies that expire at the end of a specified period of time, this policy extends up to the whole life of the insured. This policy also provides the survival benefit to the insured. In this type of policy, the policyholder has an option to partially withdraw the sum insured. The policyholder also has the option to borrow sum against the policy.
- Annuity/ Pension Plan:-
Under this policy, the amount collected in the form of a premium is accumulated as assets and distributed to the policyholder in the form of income by way of an annuity or lump sum depending on the instruction of the insured.