Life can sometimes be a gamble. Whatever you do, no matter how intelligent or hard working you are, you never know what life has in store for you. Therefore, you must have some financial backup for the security of your loved ones. Life insurance plans serve this purpose very well.
However, before choosing life insurance plans, one must know what life insurance is actually. Life insurance is an agreement between the insurance company and the policyholder. The insurance provider pays a certain sum to the covered individual’s family in the event of his demise. The life insurance payout is made in exchange for a premium. There are many types of life insurances from which you can choose as per your suitability. The main types of insurance plans are as follows:
- Money-back: Money-back life insurance plans provide periodic returns alongside insurance cover.
- Child’s plan: You must have one of these if you plan to start a family.
- Retirement plan: You must have a retirement plan to cover your expenses when not earning. Such plans are great for post-retirement income.
- Unit linked insurance plan (ULIP): A ULIP insurance plan provides you with investment opportunities and insurance.
- Endowment plan: This plan is best for insurance and savings.
- Whole life insurance: As the name suggests, this plan ensures whole life coverage.
- Term life insurance plans: This type of life insurance provides pure risk covers.
There are certain perks of having life insurance plans:
- Financial security: Life insurance provides peace of mind. This is because people can rest assured that their family and loved ones will be financially secure.
- Wealth creation: Some life insurance policies include the option to build wealth. Apart from providing life insurance, these policies invest your premium in various investment classes to provide superior risk-adjusted returns.
- Tax benefits: Some life insurance plans provide tax advantages. The premiums paid are eligible for a tax-deductible under Section 80C of the Income Tax Act.
Taking up life insurance plans is easy as life insurance calculators help you plan your budget to invest in an insurance plan. Life insurance calculators provide you the ease to calculate the actual premium amount you need to invest in life insurance plans. Apart from this, a life insurance calculator also helps you compare different types of policies. Most importantly, it is a great tool for finding the best insurance policy as per your needs.
However, you need to keep a few things in mind before taking an insurance plan. It is a type of contract that you sign up for; therefore, you should be aware of the possible complexities. Details of the policy are mentioned in policy-related documents, and there can be many finer aspects that you are unaware of. Reading your life insurance policy is thus extremely crucial. Insurance policy documents mainly contain the details of the policy you have taken up and other legal terms and conditions. The details may vary as there are many types of life insurance plans serving various purposes for consumers.
Look for these while going through life insurance policy related documents:
- Name of the policy
- Premium amount deposition-related clause
- How to reintroduce the policy should you fail to pay the premium
- The possible consequences if you cannot pay the policy’s premium after a certain period
- The exact time period for which you need to pay the premium
- The surrender value of your policy in case of premature closure of the policy
In addition to this, also take note of the following while going for life insurance plans:
- Suicide related clause
- Whether the policy is eligible for loans
- Rules regarding the assignment of nominees
- The clause for special policy-related conditions
These are the main points to keep in mind when reading life insurance policy-related documents. It is always best to thoroughly research and understand any insurance policy before you purchase it.