How does Life Insurance Work?
- List of Lifetime Financial Security
- Why Life Insurance
- Benefits of Life Insurance
Life Insurance plays a pivotal role in securing your loved ones even with or without your presence. In the meantime, when financial instability hits hard, life insurance comes to provide them with monetary well-being.
It comprehensively covers all the requirements when you're not there to help them meet even the basic needs. That is why Life Insurance is a mandate for leading a worry-free life protecting all your doubts in advance. Because you never know what's next for you in the store of life. Let's read further about the types, benefits, factors, etc. before buying a life insurance policy in this article.
Explore different types of Life Insurance, that feature all your future requirements:-
Types | Key Aspects |
|---|---|
| Term Life Insurance | It lasts for a specific number of years, depending on how long you need a policy (generally, 10/20/30 years). Provides financial strength to the policy owner at affordable premiums. There are 3 different types of term life insurance- |
| Decreasing term life insurance- It's renewable term insurance with a decreasing coverage at the predetermined ranges. | |
| Convertible term life insurance- It allows the policy owner to convert this term policy into a permanent policy | |
| Renewable term life insurance quotes a range for the policy year but renews premiums yearly. Premiums keep increasing annually so it becomes expensive later | |
| Permanent Life Insurance | It provides lifetime coverage to the insured until and unless he stops submitting the premium or usually surrenders the plan. There are different types of permanent life insurance- |
| Whole life insurance- It sources in cash value that lasts till the last days of the insured | |
| Universal life insurance- Its cash value gains interest to the insured's coverage and has flexible premiums. The premiums are adjustable over time | |
| Indexed universal insurance- The policyholder can earn a fixed interest or equity rate of return over the cash value component of the policy | |
| Variable universal life insurance- Just like universal life insurance, its premiums are flexible and can be adjusted either with a level death benefit or with an increasing death benefit. It allows the cash value to be invested in the insured's account |
When you want to secure your family's future and purchase a life insurance policy in your name. Here, you become a policyholder and add the name or details of one or more than one beneficiary to your policy. The policyholder then needs to submit a specific amount as a premium to the insurance company to keep the policy active. The beneficiaries will later receive the benefit of your policy upon your death called the death benefit upon your death. This benefit is a payout amount provided by the insurers depending upon the sum insured mentioned in your policy.
Let's understand the functionality of a life insurance policy through an example:-
Meeta is a 38-year-old working professional who bought a life insurance policy to secure her daughter Shamita's future. She pays a monthly premium to her insurance provider, in return she'll get her daughter's security at any cost. If she passes away before completing her policy tenure, her daughter will receive the amount of Meeta's death benefit. But if she survives the policy term, she herself will receive a lump sum amount of her total sum assured amount.
Procedures and Documents required for claim settlement:-
Claim Intimation:- The nominees of the assured person should approach the insurer informing them about the policyholder's death.
Submitting the Documents:- The original documents and the proof of assured death shall be submitted to claim for payout against the policy. These are the documents that are required to proceed with a claim settlement:-
Settlement of claim:- Once the nominee is done with submitting all the required documents, the insurer will proceed with the payout.
Life Insurance is not just financial protection, it's a roof saving your loved ones from all those future worries. Let's hop upon the benefits life insurance provides to you and your family:-
Benefits | Explanation |
|---|---|
| Financial protection | If you ever lose your life or meet with an unexpected accident in your life, your life insurance policy will ensure financial coverage and a stable source of income for your loved ones. |
| Tax-free payouts | The death benefit received by the beneficiaries after your death will be exempted from any taxes. |
| Debts & mortgages | If you fear bagging any inheritance of debts or mortgages to your family, life insurance can manage an outstanding debt on your behalf. |
| Funeral or burial expenses | Final rites are covered if the policyholder dies in any circumstance. It can alleviate the financial burden of your family in those times. |
| Educational aids | Life insurance also comes to the rescue when it comes to compromising your children's future. It helps to ensure your kiddo's future aspirations are met. |
| Estate planning | It's also helpful to minimize estate taxes and to plan your estate purchase or property transfers with ease. |
Here's a list of individuals who are more likely to have insurance for life, check out below:-
It's important to educate yourself before buying a life insurance policy so that you can make a learned decision about which plan suits you the best. Here's a precise list of what you should check in a policy before buying it:-
There can be n reasons for increasing premiums, let's know them down:-
Factors | Explanation |
|---|---|
| Age | The earlier/younger your start, the lower will be the premium |
| Gender | Women have lower risks of death (as per the statistics suggest) so they get a lower policy premium than men |
| Lifestyle | If you're involved in adventurous activities or an untraditional lifestyle, your premiums will be high |
| Job profile | People doing a high-risk job easily lose their lives which results in high payable amounts for a policy |
| Driving record | Being a decent and safe driver will cost you nothing but your life, hence you get minimum premiums |
| Alcoholism/smoking | Any method of consuming alcohol/tobacco/nicotine/drugs, etc will cause a hefty premium |
| Medical history | Family medical history tends to get you pre-existing conditions, and it probably will cost you heavy payable amounts |
Whenever you think of buying a life insurance policy, you must have heard that it's quite expensive to buy it. But the scene is exactly the opposite of this. We'll bust the myths related to life insurance policy:-
Myths | Facts |
|---|---|
| I'm young and I don't need life insurance. | Buying Life Insurance at a young age locks in better coverages for lower premiums and continues to benefit you even after your health deteriorates post-purchase |
| Life insurance is only for senior citizens. | The fact is, Life Insurance Policy ensures financial protection for you and your loved ones in an unexpected accident/situation. |
| I'm single and don't have any dependents, so why would I need life insurance? | Life Insurance for single survivors can provide financial freedom, and cover your debts, and burial or funeral costs post-death. It can also benefit their chosen beneficiaries. |
| My employer has given me certain coverage, so I don't need a separate life insurance policy. | Life Insurance provided by your employer shall not benefit you in the long run. It can not cover all your family needs or could end by default if you leave your job to the related company. | I can't afford heavy premiums and Life insurance is too expensive. | If you start at a young age, LIfe Insurance could be typically affordable. Primarily, the income tax clause doesn't affect the death benefit, hence it becomes tax-free. |
Life Insurance is a comprehensive tool to secure the future of your family when you're not around to provide a backbone of financial stability. But it's necessary to understand the basics, types, benefits covered, how it works, etc. of life insurance. Such that you could make an informed and sincere decision that covers you in the long run.
Here's a list of the Best Life Insurance Policy providers that will help you achieve your future goals at their best.
Compare and buy the most suitable Life Insurance Plan from the below-mentioned IRDAI-approved Life Insurance companies.
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Simran has an experience of 3 years in insurance content writing. She transitioned from hospitality to the insurance industry after her emerging interest in how vast insurance is. With her ability to write complex insurance concepts in a simple, relatable manner she keeps her audience hooked and solves their doubts smoothly.
