The role of life insurance is to help in planning for
1-Life protection in case of an eventuality
3-Children's education and future.
Life insurance provides the following benefits
1-Security and stability.
3-security against loans and investments
Life insurance solutions-
Life insurance can protect policy holder's and their families against financial losses caused by the untimely demise and partial or permanent disability.
There are also certain annuities/pension policies that can help the policy holder live an independent life after retirement.
Most solutions offer tax benefits under section 80c or section 80 ccc (1) while paying premiums. the claim or maturity proceeds are tax free under section 10 (10) D for most policies other than pension plans.
These benefits may alter depending on the change in tax laws
Types Of Life insurance:
Almost all life insurance products are a function of two components, savings and protection. Life insurance policies cna be broadly divided into the following types;
2-WHOLE LIFE INSURANCE
4-ANNUITIES AND PENSION
This is low cost insurance but it provides high risk cover. This is the simplest and least expensive type of policy. the feature of the policy are-
i)It offers pure insurance with no savings benefit. It provides 100% risk coverage.
ii)The insurance amount assured is payble only if the policyholder dies with in the policy term.
Consider a scenario, If a person buys an Insurance policy of Rs10 lakh for a period of 10 years, his family/nominee is entitled to the money only if the person dies with in 10 year period. The person forefits the amount of the policy, as well as , the premium paid if he outlives the period of the policy.
whole life Insurance-
This insurance involves coverage througout the policy holder's life.
However, benefits are accrued only after the death of the policy holder.
The main feature of whole life insurance are-
i)Policy holders pay regular premiums until their death or for an agreed number of years,whichever is earlier. the insurance amount is paid to the policy holder's family after the death of the policy holder.
ii)Insurance cover against death,irrespective of when it happens .
This policy is a combination of a risk cover with financial savings. Therefore this policy is the most popular policy in the life insurance industry.
The main features of this policies are:
i)sum assured plus bonus are payble even if the insured survives the policy term.
ii) If the insured dies during the tenure of the policy, the insurance firm has to pay the sum assured plus bonus accrued till death
I started to read this article with interest. But frankly speaking, I am disheartened. The author has tried to mention different types of life insurance policies, but he has not adequately explained each type of policy.
Let us take term insurance. Term insurance is the simplest type of life insurance. In this policy, the policy-holder pays premium monthly, quarterly, half-yearly or annually. The insurance company provides a protective umbrella during the duration of policy. This means, if something untoward happens during the tenure of the policy, the nominee gets the policy amount. However, if the nominee remains safe during the tenure of the policy, he/she doesn't get any return. In term insurance policy, the premium is very less.
So far as Endowment policy or Money-back policy is concerned, the policy-holder gets the yearly bonus declared by the insurance company, or the amount is accumulated. The premium of such policy is much more.
The author has not mentioned anything about ULIP. In such policy, a part of the premium is used for insurance and another part of the premium is invested in equities and bonds in the proportion as desired by the policy-holder himself/herself. The premium of such policy is much higher.
Last but not the least, the author has included annuity and pension plan in life insurance policy. It is totally incorrect. Annuity and pension plan cannot be classified as life insurance policies.
The author may like to include the necessary improvements for a better reading of the article.
It's a very brief article that's old and perhaps outdated on many fronts. Mr. Partha about ULIPs, I think the author has just listed it indirectly as point 4, wealth creation under the roles of life insurance but it should have been elaborated. The pros and cons of the options including that of online purchase and offline/in person purchase needs to be highlighted. The key message to have life insurance early in life should be mentioned as the premiums depend on the age factor too. Pension plans can be called as retirement planning but not as life insurance.