What is Life Insurance ? What does it mean ?

What is Life Insurance ? What does it mean ?

Life Insurance - A life insurance policy is a contract between an individual and an insurance provider, in which the insurance company pays a monthly fee/fee (called a premium) to the policyholder for providing financial protection. With the help of life insurance plans, you can achieve certain financial goals. Life insurance plans are quite versatile. You can plan for your defined life goals and customize your insurance to help you achieve them, for example, an endowment plan for your future home. Can use the corpus  to make the payment

Based on this arrangement, the insurance provider pays a lump sum amount to the individual or his family after some time when the policyholder dies or the policy matures. There are different types of life insurance policies in the market that meet the individual demands and needs of the policy buyer.

What are the different types of Life Insurance ?

• Term Life Insurance Plan
• Money Back
• Endowment Plan
• Unit Linked Insurance Plan
• Retirement Plan

1. Term Life Insurance Plan

Term life insurance plan is the purest form of life insurance. It provides you life cover without any savings or benefits. Term life insurance plans are the most cost-effective type of life insurance as the premiums are very affordable as compared to other life insurance plans. This is the purest form of life insurance.

2. Periodic Returns with Money Back Insurance

Money back life insurance plan is a unique type of life insurance policy in which a part of the sum assured is paid at regular intervals directly to the life assured in the form of residual benefits. This way the policyholder can achieve short term financial goals.

3. Endowment Plan Insurance and Savings

In an endowment plan, if the life assured lives beyond the policy term, the insurance company pays the maturity benefit to the policyholder. Also, some retirement plans may offer periodic bonuses which are paid either on maturity or in case of untimely death of the policyholder.

4. Unit Linked Insurance Plan

A Unit Linked Insurance Plan is a perfect mix of investment and insurance. A part of the premium paid for ULIP plans is used as a risk cover and a part is invested in various funds. Depending on the risk tolerance of the policy holder, they can invest in various funds offered by the insurance provider. The insurance provider then invests the accumulated amount in various money market instruments such as shares and equities.

5. Retirement Plan – Income after retirement

Retirement life insurance plans help an individual create a stable financial source for their retirement years. It helps a person to become financially independent and live without any problems. Most retirement life insurance plans provide an annuity payment (in the form of annuity) or a lump sum payment (through conversion/change of fixed amount) on completion of 60 years.

Why is Life Insurance Necessary ?

Apart from understanding the meaning of life insurance, you should also see how much life insurance cover is actually required. While it is impossible to place a fixed monetary value on a human life, it is important to estimate how much you are worth.

You can create your Human Life Size account by entering a measure of how much your family needs to be financially stable in your absence. In life insurance jargon, the sum assured and the measure of the value of the policyholder's life is the person's life assured.

What are the Benefits of Life Insurance Plan ?

Life is unpredictable and can be full of uncertainty. It is difficult to overestimate the likelihood of such an unpleasant event as death. In such a situation, due to lack of continuous income, the family has to face financial problems.

Investing in a life insurance policy early in life acts as a safety net against such eventualities. The life insurance provider is bound to pay a pre-determined amount to the nominee or beneficiary. As a result, the family remains protected even when the policyholder is not around.

Life insurance is important to consider if one is looking to invest for the long term. Such insurance plans help you save systematically and build a corpus that can be used for a number of reasons such as building a new house, better education for your child and for child marriage expenses.