Life Cover
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LIFE INSURANCE
Life insurance is an essential financial tool designed to provide security and peace of mind. It is a contract between the policyholder and the insurance company, where the insurer promises to pay a predetermined sum of money to the beneficiaries in the event of the policyholder’s death during the policy term. In return, the policyholder pays regular premiums for a specified period.
“Life insurance secures your family’s financial future by ensuring a lump sum payout in times of uncertainty, protecting your loved ones when they need it most.”
There are many types of insurance such as:
TERM INSURANCE
For a predetermined period of time, a term insurance plan offers pure life coverage. A lump sum death benefit is paid to the nominee if the insured passes away during this time, If the insured continues out the term, there is no maturity payout. Term plans are a cost-effective choice since they don’t require savings or investments, allowing them to provide very high coverage for a comparatively modest price. Important characteristics include:
Fixed-term coverage – sum assured is payed only if death occurs during the policy term
High coverage at low cost – large sum assured for relatively affordable premiums.
Tax benefits – death benefits are fully tax-exempt, and premiums (up to ₹1.5 lakh per year) also qualify for deduction
ENDOWMENT PLAN :
A life insurance policy along with savings component is known as an endowment plan. If the insured passes away during the term, the nominee will receive a death benefit; if the policyholder lives to the end of the term, they will receive a maturity benefit (amount assured plus any bonuses). Hence, it protects the family in the event of an early death and ensures a lump-sum payoff at maturity.
Dual benefits: includes both savings and life insurance. When the insured passes away, the policyholder receives a guaranteed payout (sometimes with extra additions) on maturity, and the policyholder’s family receives a death benefit.
Long-term savings: the maturity amount (sum guaranteed plus bonuses) is frequently utilized for objectives like marriage or the education of children.
UNIT-LINKED INSURANCE PLAN (ULIP) :
A ULIP combines investments with life insurance. A portion of your payment is used to purchase a life insurance policy, and the remainder is invested in market-linked funds, which include stocks, bonds, and hybrids (investopedia.com). ULIPs have the potential to increase wealth over time, but returns are contingent on market success. Crucial details:
Investment component: premiums are divided between investment funds and pure risk insurance. As your objectives change, you can choose from a variety of funds (equity, debt, and hybrid) and move between them (Investopedia.com).
Risks and flexibility: ULIPs normally have a 5-year lock-in period, after which partial withdrawals are permitted. Like mutual funds, they are subject to market risk, but they also provide the flexibility of insurance coverage.
Taxation : ULIP policies issued after Feb 1, 2021, any maturity or surrender proceeds become taxable as long-term capital gains if the annual premium exceeds ₹2.5 lakh
Each of these plan types fulfills a distinct purpose. ULIPs offer investment development in addition to life insurance, endowment plans combine protection with guaranteed savings and bonuses, and term policies provide reasonably priced, pure protection.