A life insurance plan is one aspect of making a financial portfolio that you cannot ignore. Everyone knows what is life insurance, but you might not be aware of all its benefits. Life plans are tools that you can use to protect your family’s future. This is even more vital if you are the only earning member of the family and expecting a child in a few months. It requires you to plan and ensure that your dependents can maintain their living standard in your absence.
How life insurance plans work
Life insurance policies are contracts between the insurance provider and the policyholder. The insured can purchase a policy for himself or herself and add nominees to it. Life plans come with a fixed tenure during which the policyholder has to pay regular premiums to keep the plan active. If an unfortunate event leads to the insured’s death, the insurance company pays a fixed amount, known as the sum assured, to the nominees. Depending on the plan, the nominees may receive other payouts, too.
There are different types of life insurance plans that offer a variety of benefits. You can choose a life policy that meets your needs and financial goals. If you are looking only for a life cover at affordable pricing, consider purchasing a term plan. You can buy this policy for a fixed period. If an unavoidable incident results in your absence during the policy tenure, the insurance provider will pay the death benefit to your dependents. A term plan offers a substantial death benefit, but there is no maturity pay-out. So, you can shield the monetary well-being of your loved ones at an economical cost.
However, if you are looking for a life policy that offers more than a death benefit, find a suitable one with investment options. These policies pay the life cover and help create a fortune with regular savings. One such policy is a Unit-Linked Insurance Plan (ULIP). The insurance provider puts your capital in equity, debt, or both funds, depending on your financial goals and risk appetite. In your absence, the insurer will pay the nominees the money they are entitled to get. If you survive the ULIP’s duration, the insurance company will pay you the accumulated investment fund value as a maturity benefit. ULIPs can prove useful to meet important life goals, such as financing your children’s education and their wedding.
It is essential to start investing in a life insurance plan when you are still young. This way, you will have to pay a cost-effective premium and have a longer time for wealth build-up. You can compare the benefits of different life insurance plans to determine which one is the best for you.
Benefits of life insurance policy
A life insurance policy offers many advantages. These include:
- Security
An essential part of a life plan is its stability aspect. When you purchase a life policy, it offers the assurance that the future of your dear ones is financially taken care of, irrespective of whether you can be there for them or not. This sense of security brings peace of mind, allowing you to lead a stress-free and happy life.
- Wealth build-up
Depending on your life insurance plan, you can grow your wealth considerably. You can plan for your children’s higher education, retirement, and aspirations with the returns earned from the policy.
- Tax benefits
Section 80C of the Income Tax Act, 1961 offers a tax deduction of up to INR 1.5 lakh annually on the premium paid for life insurance policies. Additionally, the death benefit is tax-free, ensuring your dependents can use the entire sum assured to fulfill their monetary needs.
Now that you know the important types of life insurance policies available and their pros, it is time to invest in the right plan. You can purchase it through your preferred insurer’s website from the comfort of your home.
