Life Insurance which is also called Life Assurance is a Contract between an Insurance Company and Insurance Policyholder, where an insurer or assurer promises to pay a sum of money in exchange for an insurance premium after a fixed period or upon the death of an insured person. Other events such as critical illness or terminal illness can also trigger payment, depending on the contract. The policyholder pays the premium either regularly or as one lump sum.
Life Insurance is a very beneficial insurance because it acts as a financial protection for our family in case of our death or a payment made to our family members on surviving the policy term. Policy Term is the time period for which a Policyholder is covered. Typically, these insurances are chosen based on the needs and goals of the owner.
A predetermined fixed amount that a policyholder’s family receives in case of policyholder’s death is called Sum assured. Sum assured is chosen by the policyholder and is always mentioned by the company in the details of Policy.
The person who receives the sum assured and other benefits in case of an insured person’s death is called Nominee. Nominee is someone from the family, in most cases but the choice of nominee totally depends on the policyholder and the name of the nominee is usually mentioned while buying the Life Insurance.
Need of Life Insurance
Life insurance can form a vital part of our family’s financial stability and well -being. It is needed in many cases like:
- Protection from Illness – Life insurance policies covers critical illness. Some life insurance policies offer features that cover severe ailments like heart attacks and cancer. These types of policies can protect form some world’s most deadly diseases.
- Growth in Savings – Many life Insurance plans can be useful way to save and invest our money. Unit Linked Life Insurance Policies (ULIPs) allow us to invest in equity and debt markets.
- Family Support– Every person wants to protect their kids and spouse from financial hardship in case of their sudden demise. So Life insurance policies are also needed for family support. They can get good returns in investing some policies.
Types of Life Insurance
|Types of Life Insurance||Coverage|
|Term Insurance Policy||Pure Risk Cover|
|Endowment Policies||Insurance cover + Saving|
|Non-linked Participating Endowment Plan||Insurance Cover+ Sum assured|
|Unit Linked Insurance Plans (ULIP)||Insurance + Investment benefits|
|Non-participating Non-linked endowment plan||Fixed Insurance Cover|
How to Buy Life Insurance Policy?
Everyone’s Situation is different. So, some simple steps which are the typical part of buying the Life Insurance Policy are given below:-
- Firstly decide the type of Life Insurance Policy
- Calculate how much Life insurance you need
- Check your Budget
- Start Looking for Insurance Plans
- Get some quotes from Reputable Insurance companies
- Then Ask questions like how the company bills premium, policy rider options, policy updates etc.
- Submit your application and Prepare for Your medical exam
- Start paying your Premiums