Human life is an unpredictable adventure. It is not only difficult but absolutely impossible to predict the future. From economic upheaval to life’s many conundrums, sudden changes and unwanted events can leave you reeling. A life insurance policy is a financial safety net to protect you against the most unpredictable consequences.
What is life insurance?
Life insurance's meaning is very simple. It is a financial safeguard to ensure the protection of your loved ones against unforeseen and unwanted events. But the meaning of life insurance actually pertains to a life insurance policy.
To understand the true meaning of life insurance, you need to know what life insurance plans are. A life insurance plan or policy is a financial contract between an insurance company and a policyholder. When you purchase the policy, you become the policyholder, and the insurance provider who facilitates this purchase is the insurer.
According to the life insurance policy contract, you may secure a specified duration of your lifetime with the plan. In the event of your demise during the policy tenure, the insurer vows to pay your beneficiaries, i.e., your loved ones, a sum of money to help them through the financial setbacks.
Here are the major terminologies to understand the life insurance meaning:
- Policy tenure - The duration during which your life insurance policy is active. It can be from 10-100 years, based on the type of plan.
- Premium - The amount of money you need to pay at regular intervals to secure the life insurance policy. The duration may be less than the policy tenure.
- Sum Assured - The total amount of money for which you secure life insurance plans. This is the amount paid to your beneficiaries as a death benefit after your demise.
- Beneficiaries - The nominees to your plan, i.e., the people who are entitled to receive the death benefit after your demise.
Other terms, such as riders or add-on,s also contribute to the life insurance meaning. However, these are the main points that you need to know when purchasing life insurance plans.
Life insurance plans in today’s market
These days, life insurance plans are available in many forms to serve various purposes. The top choices for life insurance plans are as follows:
- Whole life insurance - These policies allow you to secure the entirety of your life under a single plan.
- Term insurance - These are affordable life insurance plans available for 10-100 years at low premiums and with varying benefits.
- Endowment Plans - These offer bonuses with your life insurance coverage based on your participation.
- Retirement Plans - These life insurance plans help set you up for your golden years to ensure a steady supply of funds for all your needs.
- ULIPs - These are Unit-linked Insurance plans that allow you to invest in the current market and earn substantial profits.
- Child plans - These policies are designed to secure your child’s future by building a corpus that helps them pursue their education, career, and personal goals.
- Money-back plans - These policies allow you to make regular withdrawals of the premium paid to address your financial needs.
Some of these policy types are further subdivided into plans that serve very specific purposes. You can choose the types of life insurance plans that align with your requirements.
Why do you need a life insurance policy?
A life insurance policy is a financial safeguard that protects your loved ones from financial instability. Here are the primary reasons why you need life insurance plans:
- It helps your beneficiaries cope with financial setbacks such as loans, mortgages, and other forms of debt.
- It allows them to plan their future, such as starting a business, pursuing higher education, and other such challenges.
- It builds a corpus over time and helps you develop a savings habit. That way, if you survive the policy tenure with the return of premium on your life insurance plans, you may receive a lump sum amount to deal with your financial setbacks in the future.
- With retirement life insurance plans, you can set up your golden years to live a peaceful and hassle-free life. In the event of your demise, the benefits extend to your spouse to ensure they have an independent and smooth life in their old age.
- It prepares your loved ones for unpredictability and provides you with peace of mind.
- The premiums paid towards life insurance plans are tax deductible. Therefore, not only do you secure the financial well-being of your family after your demise, but you also save money during your lifetime.
- With certain life insurance plans, you can also earn bonuses and profits from your life insurance premiums.
The reality is that purchasing a life insurance plan allows you to guarantee a good life for those you leave behind and allows you to profit from the investment. It is a wholesome method of securing the future of your loved ones and providing you with peace of mind.
