Life insurance policy provides financial protection
Financial assistance to the family in case of death of the insurer
Tax benefits under Section 80C and 10D of the Income Tax Act, 1961
What is Life Insurance?
Life insurance is a contract between an insurance company and an insured. According to this, if any kind of accident happens to the insured in which he dies, the insurance company pays a sum assured to his nominee (family member). The life assured has to make regular payments of a small amount as premium for a limited period of time. This insurance policy acts as a financial protection shield for the family or loved ones.
Apart from financial security of the family, life insurance policy also helps in saving tax under Section 80C and Section 10(10D) of Income Tax Act, 1961. Apart from tax benefits and financial protection, a life insurance plan also offers many additional benefits, which we will know in detail later. Let us first get information about some good life insurance plans in India.
Why buy a life insurance policy and what are its benefits?
No one can tell what is going to happen in the future. The passing of someone at any point in life can cause problems for his family. Hence, buying a life insurance policy will ensure that your family will be able to live comfortably after you. They can maintain their standard of living in case of any emergency. There are many benefits that life insurance policies offer to policyholders. Let’s take a look at the most important benefits.
Financial Aid (Death Benefit)
An individual needs insurance to cover his expenses, pay off debts, maintain income and education of children. Everyone knows that death is a fact, but what happens when a person dies. So in his absence his family has to face a lot of difficulties. In such times life insurance works as an assistant and contributes to meet their needs.
Any person may face an accident in which something unfair may happen to him. The cost of self-healing after an accident is huge and general insurance policies do not provide them the support they expect. But luckily a life insurance policy is able to do that, aiming to meet the needs that we think to reduce it.
In the case of retirement, there are some schemes that prove beneficial in saving money. You keep saving money within a certain period of time which you get back as an income later. It works as a fixed income at the time of retirement.
People availing life insurance also have the option of availing loan or loan through their insurance policy. Which can help them to meet the necessities of their life without working out the assured benefits on the policy purchased.
Life insurance offers attractive tax benefits and helps you to build a huge amount of wealth. Almost all life insurance policies offer you the benefit of tax deduction on payment of premium under Section 80C of the Income Tax Act, 1961 and also offer tax-free sum assured under 10(10)D.
What are the types of life insurance policy?
Life insurance providers have created different types of life insurance plans keeping in mind the need and choice of the people. You can get information about all types of insurance policies below. Life insurance providers have created different types of life insurance plans keeping in mind the need and choice of the people. You can get information about all types of insurance policies below.
Policy This insurance policy comes under the protection category as it provides only financial protection. Basically, it covers the risk of death. In this plan, the sum assured is paid to the nominee or beneficiary as mentioned in the policy document after the death of the insured. If the insured survives the policy term, he or his family will not get any amount or can only get the premium back. Which basically varies from insurer to insurer. If you are planning to buy only life risk cover, then term insurance is the best and cheapest form of policy.
Whole Life Insurance Plan (Whole Life Insurance)
Whole life insurance policy provides protection for the whole life. In such plans, the insured is generally given an option to pay the premium amount for a specified period of time. Also known as maturity period. If the life assured reaches maturity, he/she has the option to keep the life cover till death without paying the premium and receiving the sum assured or bonus.
Endowment Policy (endowment insurance plan)
Endowment policy pays you the sum assured along with both investment and death benefits. The plan charges a high premium which is being invested in the asset market – debt and equities. Endowment is a policy in which the insurer promises to pay a lump sum amount at the time of maturity. Maturity a certain age