Life insurance can work as savior for the family in case of sudden demise of the earning member of the family. While the physical loss of the member cannot be compensated with anything, life insurance can help to meet financial goals even in the absence of the earning member. Life Insurance is seen like an expense by many of us. This article can help to understand various Benefits and Advantages in Life Insurance Plans.
What is the Life Insurance Plan?
Life insurance is an agreement between insurance company and insured individual which provides risk coverage to the life insured. In case something happens to the life insured, it would provide death benefit to the nominee or family members. Beyond this, it can also provide survival benefits, maturity benefit, periodic payout benefits etc.
10 Benefits of Life Insurance Plans in India
Now we understood the meaning of life insurance, let us summarize the list of benefits and advantages available in the life insurance policies.
#1 – Life Risk Coverage
Life insurance provides risk coverage to the life insured. In case of ultimate demise of the life insured, the nominee or the family members would get sum assured. This can help the family members to meet the financial goals even in the absence of earning member of the family.
#2 – Simple Term Plans
Many individuals would think that taking a life insurance is a long term commitment and they need to pay high amount for that. In such a situation simple term plans come handy. Term plans provide risk coverage with low premiums. Simple term insurance plans have only death benefit and does not have any survival benefits or maturity benefits.
#3 – Various Saving Plans
There are several types of life insurance plans. While some plans provide just risk coverage, but some provide risk coverage and savings too. In the medium to long term, such life insurance with savings plans can help to accumulate good amount of money that can be used for kid’s education or children’s marriage or even for retirement planning.
#4 – Whole Life Plans
Some insurance policies cover only for specific tenure. However, there are whole life plans which covers till 99 years of age.
#5 – ULIPs – Risk Coverage + Market Linked Returns
One of the types of life insurance that provides risk coverage and marked linked returns is Unit Linked Insurance Plans (ULIPs). ULIP plans are those where one can get risk coverage to the life insured and at the same time, the ULIP units are allocated based on the NAV of the underlying fund as and when renewal premiums are paid. Such ULIP fund can invest in government bonds, corporate bonds or equity. The NAV can move up or down based on the prices of the underlying securities. In medium to long term, ULIPs can generate high returns as these are equity linked. One should review various charges before opting a ULIP plan. Some of the ULIPs provide high commission to insurance agents, hence the investment what you have done would remain low for initial years. One can consider a ULIP plan that has low charges.
#6 – Money Back Plans
This is another type of life insurance plan where one need to make regular premium payment and they can get money back at period intervals. E.g. one need to pay premiums every year and they can get money back at 10th year, 15th year, 20th year etc., Such plans can help you have periodic inflow that can be used for kids education or plan for children marriage or for any other purpose.
#7 – Retirement and Pension Plans
There are two types of retirement and pension plans to build your own pension income i.e. deferred annuity and immediate annuity pension.
In deferred annuity, one need to invest for specific period and can get pension after a defined period. After the investment period is over, pension income would start and it would be paid for the rest of the life. In case of demise of annuitant, nominee/family members would continue to get pension income.
In immediate annuity, one need to invest in lumpsum and pension would start immediately. Such pension income again would come for the rest of the life till the annuitant is alive. In case of sudden demise of annuitant, nominee or family member would continue to get pension income.
#8 Income Tax Benefits
Life insurance provides risk coverage and savings too depending on the type of plan taken. It also provides two types of income tax benefits.
Life insurance premiums paid are eligible for income tax rebate u/s 80c up to Rs 1.5 Lakhs per financial year.
Life Insurance maturity amount is exempted u/s Section 10 (10).
Understanding various benefits in life insurance plan would help you to realize that it is a serious step in financial planning.
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