Life Insurance is a financial product, wherein the policy holder and the life insurance company comes to an agreement. A lump sum amount is paid by the insurance company in the form of insurance coverage to the nominee/insured in return for the premium after a specific period or in case of the death of the insured.

What is Life Insurance Policy?

A life insurance policy is an agreement between an insurance company & a policyholder that offers financial coverage under which the insurance company guarantees to pay a certain amount to the nominated beneficiary in the unfortunate event of the insured person's demise during the term of life insurance plans. In exchange, the policyholder agrees to pay a predefined amount of money as premium either on a regular basis or as a single premium.

If covered by the policy, coverage will be provided for critical illness as well.

Since it provides enhanced insurance coverage, it attracts an enhanced life insurance premium.

Life Insurance refers to a policy or cover whereby the policyholder can ensure financial freedom for his/her family members after death. Suppose you are the sole earning member in your family, supporting your spouse and children.

In such an event, your death would financially devastate the whole family. Life insurance policies ensure that such a thing does not happen by providing financial assistance to your family in the event of your passing.

Types of Life Insurance Policies

There are primarily seven different types of insurance policies when it comes to life insurance. These are:

Term Plan - The death benefit from a term plan is only available for a specified period, for instance, 40 years from the date of policy purchase.

Endowment Plan - Endowment plans are life insurance policies where a portion of your premiums go toward the death benefit, while the remaining is invested by the insurance provider. Maturity benefits, death benefit and periodic bonuses are some types of assistance from endowment policies.

Unit Linked Insurance Plans or ULIPs - Similar to endowment plans, a part of your insurance premiums go toward mutual fund investments, while the remaining goes toward the death benefit.

Whole Life Insurance - As the name suggests, such policies offer life cover for the whole life of an individual, instead of a specified term. Some insurers may restrict the whole life insurance tenure to 100 years.

Child’s Plan - Investment cum insurance policy, which provides financial aid for your children throughout their lives. The death benefit is available as a lump-sum payment after the death of parents.

Money-Back - Such policies pay a certain percentage of the plan’s sum assured after regular intervals. This is known as survival benefit.

Retirement Plan - Also known as pension plans, these policies are a fusion of investment and insurance. A portion of the premiums goes toward creating a retirement corpus for the policyholder. This is available as a lump-sum or monthly payment after the policyholder retires.

Benefits of Life Insurance

If you possess a life insurance plan, you can enjoy the following advantages from the policy.

Tax Benefits - If you pay life insurance premiums, you are eligible for tax benefits in India, under Section 80(C) and 10(10D) of the Income Tax Act. Thus, you can save a substantial sum of money as taxes by opting for a life insurance plan.

Encourages Saving Habit - Since you need to pay policy premiums, buying such an insurance policy promotes the habit of saving money.

Secures Family’s Financial Future - The policy ensures your family’s financial independence is maintained even after your demise.

Helps Plan Your Retirement - Certain life insurance policies also act as investment options. For instance, pension plans offer a lump-sum payout as soon as you retire, helping you to fund your retirement.

Now that you know all about life insurance policies read on to understand the various facets of other general insurance policies.

Types of Insurance Plans

Car Insurance

Car Insurance is a type of vehicle insurance policy that protects your car & car owner from any risks & damages that may lead to financial losses.

Travel Insurance

Travel insurance provides comprehensive coverage against things that are likely to spoil your trip. It covers your medical expenses and other risks so that you can enjoy your trip hassle-free.

Life Insurance

Life Insurance is a financial product, wherein the policy holder and the life insurance company comes to an agreement.

Business Insurance

Business insurance coverage protects businesses from losses due to events that may occur during the normal course of business.