A life insurance policy is a mutual contract between the insured and the insurance company. In return of the premium payments, the insurance company guarantees compensation for loss of life in return. In life insurance, the beneficiary whose name has been mentioned in the contract is liable to receive the specified amount from the insurance company in the case of mishappening like loss of life.
Life insurance is the best deal as it has several benefits. These benefits can be summarized as follows:
1. Promote saving: When we buy a Life insurance policy it certainly saves our hard-earned money and gives us long-term benefits by giving us a certain rate of interest.
2. Varied Plans: Insurance companies have different plans and the client can choose according to their needs and capacity from the various options.
3. guaranteed sum: Insurance policies assure the insured of a guaranteed sum to the nominee of the insured in case of mishappening or provides survival benefits to the insured.
4. Loan: Insurance companies also have the provision of loans to their customers. Customers can borrow a certain amount on selected policies.
5. Tax Benefits: Under section 80C of the income tax Act, 1961 insurance premium is tax-deductible and one can get a rebate on it.
Kinds of Life Insurance
Mainly there are 6 kinds of life insurance policies
1. Term Life Insurance policy: these kinds of life insurance policies are very popular among people. Generally, such kinds of policies are for the period of 5 to 30 years. This sum assured is payable to the nominee in case of death of the policyholder
2. Money back policy: In such types of policies the policyholder gets a certain amount from time to time. Money back policy is generally taken for a period of 10 to 25 years. Survival benefit is paid to the policyholder on maturity.
3. Endowment policy: Endowment policy is also popular among the masses. It includes protection as well as investment. Bonuses are also paid on maturity or on the death of the policyholder. It is suitable for the people who have the capacity to pay a high premium and are interested in protecting themselves and getting better investment.
4. Whole Life Policy: As the name suggests, it covers the whole life of the policyholder. Its duration can be long years i.e. from 30 to 40. Sum assured is paid to the nominee, in case of the death of the policyholder.
5. Annuity/Pension Policy: This policy is for people who want to have a regular income source post-retirement. It does not give a higher return on investment but certainly, it provides a kind of satisfaction to the policy holder. In this category, premiums are mostly high priced. The annuity pension policy is non-participatory.
6. ULIP (Unit Linked Insurance Policy): Such policy is of double beneficial for the policyholder. They grow with the growth of the market. Unite linked policy is investment plus insurance policy. Tax exemption can be claimed in the Unit Linked Insurance policy. People with higher income and who want to diversify their money can opt for it.