Basics of buying life insurance
Life insurance provides a family with financial support should something happen to the breadwinner. Besides serving as a protective cover, life insurance acts as a good money-saving scheme, which enables one to accumulate wealth to acquire assets, get children educated and retire comfortably. Life insurance also acts as an ideal tax-saving scheme. It is a contract between the insured person and the company that is providing the insurance. If you die while the contract is in force, the insurance company pays a specified sum of money free of income tax to the person or persons you name as beneficiaries. The beneficiary can use the cash benefits in the way he or she deems fit.
Benefits
Lack of sufficient life insurance coverage when a loved one dies can have devastating consequences for a family. The loss of income following the breadwinner’s death will cause the family immediate economic hardship and make it harder for them to realize future goals like paying for children’s education. If you are married or not you may need life insurance to protect your partner or surviving family members. Unless you already have sufficient financial resources, your survivors will need life insurance cover. A life insurance policy can be the basis of protection and financial stability after one’s death. There can never be adequate compensation for the loss of a dear one. But, if the family is also left without sufficient money to meet basic needs, they will suffer more.
Savings
Besides other saving benefits a life insurance policy can be linked to a person’s pension plan. A person can make contributions to a pension that is funded by a life insurance company. A policy can provide security for your family, protect your home mortgage, take care of your estate planning needs and look at other retirement savings/income vehicles. Life insurance is the only investment option that offers specific products tailor-made for different stages of life. Broadly there are two types of life insurance: Term, and Permanent. Savings through life insurance guarantee full protection against risk of death of the saver. Also, in case of demise, life insurance assures payment of the entire amount assured with bonuses wherever applicable.
Any person who has attained majority and is eligible to enter into a valid contract can insure himself/herself. Policies can also be taken, subject to certain conditions, on the life of one’s spouse or children. While underwriting proposals, certain factors such as the policyholder’s state of health, the proponent’s income and other relevant factors are considered. Policies can also be taken, subject to certain conditions, on the life of one’s spouse or children. While underwriting proposals, certain factors such as the policyholder’s state of health, the proponent’s income and other relevant factors are considered by the Corporation. At the time of taking a policy, policyholder should ensure that all questions in the proposal form are correctly answered.
Sum Assured
A person taking a life insurance policy can select a policy for a sum, which is linked to his age, income and ability to pay the premium. Higher the sum assured higher is the premium. For policies with higher sum assured medical examination is mandatory. The sum assured on a life insurance policy is payable on maturity (end of policy term) or on death of the policyholder. In the case of policyholder’s death, the nominee must inform the life insurance company of the death and provide all the necessary documents such as notification of death etc. The company will then process the papers and make the payment to the nominee.
