A Step for Future - Life Insurance

Rajeev was securing money for his new restaurant. He got married to Neha last year. Then they both invested their whole saving in the startup of Rajeev. They even took a loan from the bank. It was all going smoothly, slowly. Just then Rajeev met with a road accident and lost his life. Neha was all lost, with no economic support and security. Along with the trauma of Rajeev’s death, she was burdened with the bank loan and no financial security.  She had to take support from her old parents in order to get rid of the bank loan amount and she even sold the restaurant at a loss. Instead of being strong and facing the situation of loss with Rajeev’s family, she was feeling like a burden on the head of them.

This is not a rare story, but it can happen to anyone. Character and plot may change but, the loss that is caused due to the untimely death of the earning head of family cause trauma financially, mentally and socially. If Rajeev was not short-sighted and he behaved in an aware manner, Neha might have avoided this entire crisis. The solution is life insurance. 

There are various insurance policies in the market and one of the most important insurance is the Life insurance policy. Life Insurance in India is emerging as most popular insurance among the masses. Life Insurance is a contract which is signed between an individual and an insurance provider, wherein the insurance provider guarantees to pay a certain sum of money (sum assured) in case of the insured individual’s death. The insured person has to pay a certain amount to the insurer as premium towards maintaining the life insurance policy. The primary purpose of a life insurance policy is to protect the financial interests of the insured’s family in his or her absence. While looking for a life insurance, policyholder needs to be aware of basics terms. There are 3 basic aspects related to life insurance, namely:

•    Premium – An individual is accorded cover only if he/she pays a certain sum of money towards the policy. This is termed as the premium. One can consider it to be the initial investment which offers returns in the future.

•    Death Benefit/Sum Assured – This is the money which the insurer assures to pay to the nominee/beneficiary of the policyholder after his/her demise. This varies based on a number of parameters.

•    Term – An insurance policy provides protection for a certain period of time. This is called the term, and it could vary based on the type of policy chosen.

There are various types of life insurance policies. The insurers in the market offer a diverse range of products, which can be categorized into six broad types, namely:

1. Unit Linked Insurance Policies (ULIPs)

If the customer is looking for protection cum return then he/she can consider Unit-Linked Insurance Plans. These policies are ‘linked’ to market products like mutual funds, bonds, stocks, etc. There is a certain amount of risk associated with ULIPs, with this risk falling on the policyholder.

2. Term Insurance Plans:

Under term insurance policy the insured individual is protected for a fixed term of time, with the insurance company paying his/her nominee the sum assured of his/her death during the policy term. One should consider this plan if he/she foresees their demise within a specific period of time.

3. Endowment Policies:

The endowment policies not just offer life cover, but also acts as a savings instrument to cater to any future needs, hence it serves dual purpose successfully. These plans attract a higher premium when compared to regular term plans.

4. Whole Life Policies:

Whole Life policies can be in the form of insurance plus investment plans, wherein a death benefit is provided to the nominee on the demise of the policyholder. Certain insurers can have an upper age limit for the maturity of policy as per the insurance plan.

5. Pension Plans:

Retirement plans, also known as annuity/pension plans can be used by individuals looking to financially secure their retired life. Mostly these are the single premium policies and a lump sum amount to be paid to the insurer.

6. Money Back Plans:

Money back policies are a subset of endowment plans which provide a survival benefit to the policyholder. These take multiple contingencies into account.

One should choose a good life insurance plan so that he/she can be ready to face the unpredictability of life that can cause irreversible damage to our loved ones. A good life insurance plan not only minimizes the financial burden on the head of the policyholder but also help the near and dear ones. With a good life insurance plan, not only you will live a stress-free life but you will be tension free for the well being of your family in your absence.