We are going to decode the term life insurance. It is a bond between the life insurance policy company and the insurance policyholder (you).
In this bond, the insurance company or insurer promises to provide a certain lump sum amount in return for the premium given by you. The insurer will give either you or your dependents a secure sum of money after maturity or any uncertain casualty that happened to you that is upon your death.How life insurance plan works?
In simple words, life insurance means to secure your loved one's future by paying a certain fixed sum and get it back after maturity or after your demise.
It is a backup plan for life, start paying a small amount the moment you choose a life insurance plan, it can be weekly, monthly, quarterly, half-yearly, or yearly and select the maturity year after that you have to give that amount mentioned in the premium.
Benefits of a life insurance
"Everything is a lie except death". It is insurance that is designed or created to reduce the impact of the financial loss that may come upon your family after your death.
- You will be liability-free, the insurance provides your family to live independently after your demise, the death is uncertain so, after you, your family might not be able to repay few loans like an auto loan, home loan, or personal loan. The term plan helps them to recover from such loans or any other financial burden.
- You might be the only earning person in your family so the insurer will provide a guaranteed one-time income or monthly income for your family so that they do not have to ask others to help.
- After any uncertainty at least that amount will help your family members to pay the bills of education wedding or any medical cost in the future.
- In case of your demis, the insurer will provide immediate funds that can be used for hospital or medical costs and sadly but for the funeral cost.
What is the right time to buy a life insurance plan?
We all know life is uncertain so delaying this process can end up with not getting any plan so when you buy this plan you might feel peace in your mind that at least your family is secured now.
Just get it now after that you don’t have to think about:
- What will happen to my family financially after me?
- How will my family survive and take care of their expenses in my absence?
- In case of a job loss after an accident, how will I help my family?
- How do I am sure that I can provide sufficient funds for my kid's higher education in the future?
It will be an insured income after your retirement, in case of maturity completion.
How many types of life insurance are there?
There are two types of insurance:
- Traditional and
- Market linked
Traditional life insurance:
It will provide multiple benefits in terms of life cover and return. It will provide safety and security to the policyholder. These policies are counted as risk-free policies because they provide a fixed benefit in case of the death of the insured person or provide a fixed amount after the end of the term.
Traditional life insurance is also of three types:
Term insurance plan:
In this plan, you have to pay in a small amount for more than 15 years and it will provide a fixed payout in case of your demise.
For example- You have a small family and you have taken a one-crore term insurance plan at the rate of 800 INR per month, which means you have to pay 9600 INR per year to cover a one-crore insurance policy.
You are the only earning person of your family but some unfortunate thing happened and then your family will get a lump sum of one crore and that amount will help to secure at least your family's future and your family will be able to survive and arrange some alternative with that amount though it is impossible to fill your space that amount can reduce the financial burden and problems of your family.
Guaranteed return plan:
It clearly mentioned if you survive till the date of maturity of the policy then you’ll get a lump sum guaranteed return. It cannot be equivalent to a term life plan it will provide a lesser cover amount but generally, people prefer these plans for the maturity benefit. You have to pay a bit more than the term plan for this plan.
Money-back plan
In this policy, the policyholder will get some percentage of the sum assured as a guaranteed payout after some fixed intervals. We can say moneyback policy is guaranteed return plan with extended liquidity.
Market-linked plan or Unit linked insurance plan
This plan covers both protection and saving. Saving is the primary aim of this plan with the additional benefit of protection covered. In this policy, your funds will be linked to the market so the chances of return are respectively high with the other plans but we all know that if return risk is high there is also the possibility of low return so the total performance of this plan is dependent on the market.
Why you must buy a life insurance plan?
Humans are very optimistic but life is also full of surprises we are always prepared for good surprises but we should also be prepared for the bad ones and that can happen anytime. A health emergency or sudden death can destroy the family so these are the few small steps that can at least secure the future of your loved ones.
Your replacement is impossible but your earning potential can be handed over to the insurance team. You cannot hand over all your responsibility to the insurance company but your financial status can be transfer to any insurance company by buying life insurance.
Thanks for info
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