A life insurance policy is a type of contract between an insurance company and the policyholder, which provides financial protection to the individual’s family in case of an unfortunate eventuality. The policyholder has to make premium payments as per the terms and conditions of the policy to receive the death benefit as specified in the policy. To put it simply, the policyholder pays a certain amount of premium for the policy, and in the event of his/her death, the beneficiaries receive a fixed amount.
Life insurance remains one of the most popular modes of securing financial protection for an individual’s family. This is revealed by the fact that despite inflationary trends coupled with an economic slowdown, the insurance sector registered a growth rate of around 15-16% in 2019. According to industry experts, along with expansion in the sector, there was a considerable decrease in the number of complaints pertaining to settlement of insurance claims. Also, more women from Tier II and Tier III cities purchased life insurance policies in 2019.
There are manifold benefits of a life insurance policy; the foremost being the mental peace it brings to the policyholder. With insurance companies diversifying the scope and reach of the policies, you can select an insurance policy to suit your unique requirements. Some of the benefits of life insurance as as follows:
- Mental peace and financial security: Life is uncertain. Even if you are financially well-off, there is a chance that any unfortunate eventuality like sudden demise can spell financial problems for your family. This becomes even more important if you happen to be the sole breadwinner of the family. But a life insurance policy guarantees that even in your absence, your family has a financial safety net. An adequate insurance cover goes a long way in ensuring that your loved ones will be financially protected even if you are not around.
- Tax savings: Another benefit of life insurance policy is that you can avail tax benefits on it. Under Section 80C of the Income Tax Act, you can avail tax deductions on annual premium payments up to Rs 1.5 lakh. Under Section 10D of the act, the sum assured to your beneficiary is also exempt from taxation.
- Wealth creation: A life insurance policy can also allow you to grow your financial resources. For instance, Unit Linked Insurance Policies (ULIPs) provide you the opportunity to create wealth in addition to the life insurance cover.
- Retirement planning: Another benefit of life insurance policy is that it allows you to plan for the golden years of your life. You can also select an annuity or a pension plan to plan for your retirement. This ensures that you have a retirement corpus or a monthly pension to secure your financial requirements.
- Protection from critical illness: Insurance companies also provide critical illness cover in some life insurance plans. This can help you to tide over the high cost of medicines and health cover. Most of the life insurance plans with critical illness cover provides a lump sum payment if you are diagnosed with a wide array of debilitating health conditions.
Thus, with the diversification of life insurance plans, there is a wide range of policies that you can select from. Some of the insurance policies are:
- Term insurance plans: These provide financial security to your loved ones for a fixed term. It can range from 10 years to 30 years. This is the simplest and most affordable of all life insurance plans.
- Unit Linked Insurance Policy (ULIP): Here, a part of your premium payment is invested in different funds, as per your choice.
- Whole life insurance plans: As opposed to term insurance plans, which are for a fixed period, this policy extends insurance cover for the entire life of the policyholder.
- Endowment policy: Here, the policyholder receives a lump sum amount for surviving the term of the policy.
- Savings plans: These policies generally allow you a fixed amount as maturity benefit. Some insurance companies also provide plans to provide income throughout the policy’s tenure.
- Retirement/pension plan: These policies allow you to create a retirement corpus.
Conclusion: Considering the uncertainty of life, it is a must for every individual to have a life insurance policy which would provide financial security to the policyholder’s family in the case of any unfortunate event. In addition to life cover, insurance companies now offer a host of other advantages which not only provide financial security, but also allow for wealth creation, savings and retirement planning.
You can zero in on the iSelect+ Term Plan from Canara HSBC Oriental Bank of Commerce, which provides comprehensive security for you and your family. This online plan provides a plethora of benefits, including tax benefits, spouse cover, increasing, decreasing and level coverage options and optional in-built protection like accidental death and accidental disability covers.