A life insurance plan covers you against the various risks of life and gives financial protection to you and your family. A company will provide you with insurance according to your salary or earnings. According to the basic rule, a company should give you insurance 10 times of your annual earnings. The policyholder will get a lump sum amount if he/she dies, unfortunately. The amount paid to the beneficiary will let them live their life without any compromisation.
Benefits of A Life Insurance
- delivering of money at regular intervals
- protects the other family dependents
- offers exemption from income tax
- unfortunate death or illness protection
- a means of saving
What is a Best Life Insurance
First, you need to know about your requirements. If you don’t know why do you need insurance, you will not be able to get the best. Secondly, you should be aware of all the offers and deals provided by various companies. And the third thing, your insurance premium should be pocket-friendly. You must assure yourself that you get a high sum and you should get higher returns if you choose the money-back policy.
Maturity proceeds are paid at the end of the insurance term or an unfortunate accidental death of the policyholder. The most important benefit of this type of insurance is that you will get an exemption on the payable premium and the maturity proceeds.
Now some of the companies also offer you a pension scheme for your post-retirement lifespan. You can gather your entity through the plan and also get a tax deduction on the premium. Hence, it relies on you that what plan do you opt according to your requirements.
Traditional Insurance Plans
- Endowment or money back plan
- term insurance plan
Term Insurance Plan
A person can buy a term insurance plan by paying a possible low premium. It is the purest form of the insurance policy. Term insurance will cover you against any risk but will not give any return at the end of the term period.
The premium for your cover is payable regularly on an annual basis. Options are available monthly, quarterly according to the ease of the customer. Discounts and special offers are offered generally to the annually paying customers. A salaried person certainly goes with the annual method as they find ease in the monthly deductions. According to section 80C of the Income Tax Act, the premium paid against any life insurance is found exempted.
In case of the death of the person insured, the assured lump sum amount is paid to the nominee. This amount is tax-free.
The term plan with return of premium is a modified version of the term insurance plan. If the policyholder survives after the term, the premium paid by the policyholder will be returned by the insurance company. However, the premium will be higher than that of a pure term insurance policy.
Money back policy
A money-back endowment policy stands efficiently in meeting your financial needs. As per the T&Cs, in a 15-year term policy, you will get 25% of the assured sum in the 12th year, 13th year, and 14th year.
The company shares the profits in the form of bonuses if you pay long-term policy premiums.
The difference between a money-back plan and an endowment plan is very small. If you chose an endowment plan, the maturity amount will be paid at the end of the term. There will not be any payment before the maturity date. Hence, the amount that you will get at the end of the term will be higher than the money-back plan.
Selection of a Life Insurance Product
The following factors should be checked before buying a life insurance policy:
- Insurance premium
- Sum assured
- Policy term
- Premium payment term
- Online policy
- Claim settlement ratio
- Customer support
- Claims process
The premium will play important role in the selection of an insurance policy. The premium should be affordable. If you go for a term policy, it is possible to get the highest coverage. However, you should provide accurate information about your health. If the information is false, the insurance company can reject your claim.
All insurance companies work under the guidelines of the IRDA (Insurance Regulatory Development Authority). You should get insurance coverage which is sufficient to fulfill the needs of your family members in your absence.
The riders will increase the power of the life insurance plan. You will get additional benefits by including riders. For example, you will get double the assured sum of accidental death rider.
The premium payment term will be similar to the policy term. If your earnings come down, you will not be able to pay the premium. The sum assured will increase with the rise in premium on an annual basis.
Related Article- Death Insurance claim.