What is Life Insurance?
The purpose of life insurance is to provide financial protection to surviving dependents after the death of an insured. It is essential for applicants to analyze their financial situation and determine the standard of living needed for their surviving dependents before purchasing a life insurance policy. Life insurance agents or brokers are instrumental in assessing needs and establishing the type of life insurance most suitable to address those needs. Several life insurance channels are available including whole life, term life, universal life, and variable universal life (VUL) policies. It is prudent to re-evaluate life insurance needs annually, or after significant life events like marriage, divorce, the birth or adoption of a child, and major purchases, like a house.
Type of Insurance Plans
Term Insurance Plan is a form of life cover, it provides coverage for defined period of time, and if the insured expires during the term of the policy then death benefit is payable to nominee. You can buy a term cover of Rs 10000000/- with as low as Rs 585* Per Month.
Investment Plans are essentially of two types, Unit Linked Insurance Plans or ULIPs that provides returns based on market performance, and traditional endowment plans that offer a lump sum or annuity payout at the end of the policy term when the life insurance policy matures. The main attraction of ULIP’s are that capital gains are absolutely tax free.*
Pension Plan is the retirement amount, which an individual gets from their insurance companies on a regular basis or in the form of a lump sum. There are various types of such plans available in the country offered by various companies.
Child Plan is insurance cum investment plan that serves two purposes – Financially secure your child’s future & finance the turning points in his/her life such as higher education and marriage.
Need of Life Insurance
To protect your family and loved ones
If your loved ones depend on your financial support for their livelihood, then life insurance is a must, because it replaces your income when you die. This is especially important for parents of young children or adults who would find it difficult to sustain their standard of living if they no longer had access to the income provide by their partner. You will also need to provide enough money to cover the costs of hiring someone to cover the day-to-day household tasks, like cleaning, laundry, cooking, childcare and everything else a growing family needs.
To leave an Inheritance
Even if you don’t have any other assets to pass to your heirs, you can create an inheritance by buying a life insurance policy and naming them as beneficiaries. This is a great way to set your kids up for a solid financial future and provide for any monetary needs that will arise.
To pay off Debts and Other Expenses
In addition to providing income to cover everyday living expenses, your family needs insurance to cover any outstanding debts, like the mortgage, credit cards and car loans. Other expenses include funeral and burial costs that can easily run into the tens of thousands of dollars. You don’t want your spouse, parents, children or other loved ones to be left with any extra financial burden in addition to the emotional burden they’re already suffering.
To add more Financial Security
Like most parents you probably want to know your kids will be well taken care of when you’re gone. You not only want them to get a quality college education, but to provide for other life ventures like getting married or starting a business. For this reason, additional coverage is absolutely essential while your kids are still at home.
To bring peace of mind
We can’t know when we’ll pass away. It could be today, tomorrow or 50 years from now, but it will happen eventually. No amount of money could ever replace a person. But more than anything, life insurance can help provide protection for the uncertainties in life. Without a doubt, having life insurance coverage will bring you and your family peace of mind. It’s one thing you can be sure of and you’ll no longer have to question whether they’ll be taken care of when you’re gone. Life insurance protects your heirs from the unknown and helps them through an otherwise difficult time of loss.