Life Insurance is a contract or a mutual agreement between the insurance company and the person who is getting insured. The agreement states that the corporation has to pay a lump sum amount to the nominee who is selected by the insured person when any mishap takes place with the insured. The Life insurance policy is a cover for the family or the loved ones who are dependent on you for financial needs after you are no more. The insured has to pay a small amount for the specified amount of time and then the company pays a lump sum payment to the family of the insured person if the mishap takes place.
Why Should I Buy a Life Insurance Policy?
Well, There are a lot of reasons for which Life Insurance can turn out to be vital and a life saver for your loved ones. Life Insurance policy is a financial security for your family as well as your loved ones who are dependent on your income. Although the loss of your dear ones could not be compensated by money, these monetary terms will help them to survive in your absence. These life insurance plans are unit-linked plans can be taken for life insurance as well as the investment purpose. You can choose the distribution of the amount in the financial market. These policies even allow you to raise a loan on their basis. The insurance policy offers a tax deduction of premium paid, and the also the tax-free sum is assured under section 80 and 10 D of the Income Tax respectively. Additionally, you get a lot of excellent options for death benefits under the insurance plan, funding for child education, and regular income under the pension plan and investment under unit- linked plan, etc.
Key features of Life Insurance plans
Life insurance is a contract between an individual with an insurable interest and a life insurance company to transfer the financial risk of premature death to the insurer in exchange for a specified amount of premium. The three most important components of the life insurance contract are a death benefit, a premium payment and, in the case of permanent life insurance, a cash value account.
Death Benefit: The death benefit is the amount of money the insured’s beneficiaries will receive from the insurer upon the passing of the insured. Although the death benefit amount is determined by the insured, the insurer must determine whether there is an insurable interest and whether the insured can qualify for the coverage based on its underwriting requirements.
Premium Payment: Using actuarially based statistics, the insurer determines the amount of premium it needs to cover mortality costs. Factors such as the insured’s age, personal and family medical history, and lifestyle are the primary risk determinants. As long as the insured pays the premium as agreed, the insurer remains obligated to pay the death benefit. For term policies, the premium amount includes the cost of insurance. For permanent policies, the premium amount includes the cost of insurance plus an amount that is deposited into a cash value account.
Cash Value: Permanent life insurance includes a cash value component which serves two purposes. It is a savings account that allows the insured to accumulate capital that can become a living benefit. The money accumulates on a tax-deferred basis and can be used for any purpose while the insured is alive. It is also utilized by the insurer to mitigate its risk. As the cash value accumulates, the amount the insurer is in danger for the entire death benefit decreases, which is how it can charge a fixed, level premium.
Best Life Insurance Plans in India
In India, there are presently 24 companies which give life insurance plans. Out of the whole lot, the only company which provides under the public sector is LIC of India. The rest of the companies are either the private ones or JVs between national and international insurance/finance companies and private or public sector banks/financial institutions. The private life insurance companies were given the access to this in the year 2000. Most of the private companies have combined with international insurance players to bring up their businesses. The average claim settlement is 97 percent by the life insurance companies.