Life is unpredictable. Everything can change in the blink of an eye, which is why it is important to have a viable plan for emergencies. Life insurance plans are a vital part of financial planning. Let us discuss what life insurance plans are, their features, benefits, and why you need to purchase them as early as possible.
What is life insurance?
Life insurance is a form of financial contract that you can purchase from an insurance provider. It is a financial tool which guarantees that if you as the policyholder, pass away during the policy tenure, your beneficiaries will receive a lump sum death benefit to help them plan their future.
There are many factors involved in a life insurance plan, which are as follows:
- Sum assured – It is the total value for which you can ensure the future of your family. In the event of your demise, your beneficiaries receive the sum assured as a death benefit.
- Beneficiaries – They are the nominees in your plan. You can choose the beneficiaries who will receive the death benefit or the sum assured in the event of your demise. You can add one or multiple beneficiaries to your life insurance plan.
- Premium – It is the amount of money that you pay to the insurance provider to avail of the benefits of a life insurance plan for your beneficiaries. You can divide this amount to be paid at regular intervals or pay a one-time single lumpsum premium to purchase the policy.
- Policy tenure – It is the total duration for which you purchase the policy. As per the terms of your life insurance plan and the type of life insurance policy, you can choose the policy tenure from 10-99 years.
- Add-ons/Riders – These are additional terms that you can add to your life insurance plan to elevate the value of the policy.
A life insurance policy is a helpful financial gadget. In the event of your demise, your beneficiaries will need to file a claim. Based on the premium payments, sum assured, and policy tenure, the insurer will pay them the death benefit. They can use the sum of money to plan for their future.
Features of life insurance
There are a number of features of life insurance plans that you can avail of when purchasing the policy. They are as follows:
- A life insurance plan is contracted in the name of the policyholder.
- You can add multiple beneficiaries to your life insurance plan.
- You can choose the claim settlement as a lump sum amount or paid out in regular intervals to support your family’s financial needs.
- If you survive the policy tenure of your life insurance plan, then you can claim maturity benefits based on the terms of the policy.
- You can choose the sum assured based on income versus expenditure and the needs of your loved ones.
- You can select the policy tenure based on your estimation of Mortality. You can choose a short plan with term plans or opt for a longer policy tenure, up to 99 to 100 years.
- You can add various riders to your life insurance plan to elevate the value of the policy as well as avail of special amenities and payouts or bonuses.
- You can claim tax benefits on your life insurance plan. These tax benefits are applicable to the premiums paid annually, as well as the death benefit or maturity benefit.
The features of life insurance can be used to support your current financial needs as well as secure the Future of your loved ones.
Benefits of purchasing life insurance early
A life insurance plan is an excellent financial tool that you must Consider purchasing as early as possible. During the early life stages, you may be less susceptible to diseases and illnesses that reduce your lifespan. You may also have fewer health issues that may impact your life insurance policy. Therefore, insurance providers offer life insurance plans to early years at a reasonable and lower rate of premium.
Over the years, as you succumb to Illnesses and other critical health issues, your life insurance premium may increase exponentially. If the premium crosses the INR 1.5 lakhs benchmark, then you may not be entitled to tax benefits on your life insurance plan.
The unpredictability of life is also a viable factor to consider when purchasing a life insurance plan. Not having a suitable policy during the time of your demise may cause your loved one’s extreme financial stress. Ergo, it is necessary to purchase a life insurance plan as early in your life as possible.
Conclusion
A life insurance plan can be an excellent way to help your loved ones plan their financial future without stress and hassle. The money paid as a death benefit or maturity benefit can also be used for loans, debts and mortgages. Based on the type of life insurance plan you choose; you can also make regular withdrawals to support your current financial needs.
