Life insurance financially protects your loved ones. Life is a game, being more specific game of chess where life can declare checkmate at any point of time, this is not certain.Life is beautiful, but also full of uncertain things. Life Insurance is defined as a contract between the insurance company and the policy holder, where the life insurance company pays a specific sum to the insured individual's family upon his death. The life insurance sum is paid in exchange for a specific amount of premium. A contract with insurance company is known as life insurance.
Benefits of Life Insurance
To minimize the impact of the ﬁnancial loss your family may incur upon your demise life insurance is designed. The significance of having a life insurance is to avail the "peace of mind" that it brings along. However, having an adequate amount of life insurance effectively sets your mind free of some important questions like: What will happen to my family financially after I die? How do I ensure an income after my retirement? When it comes to know about life insurance there is lot more. In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured's death. Life insurance is chosen based on the needs and goals of the owner. Term life insurance generally provides protection for a set period of time, while permanent insurance, such as whole and universal life, provides lifetime coverage. It's important to note that death benefits from all types of life insurance are generally income tax-free.
Importance of Insurance
Insurance is an essential cost that a person requires to have to cater to the needs to secure the future of their family. Even if you consult a financial advisor you will be suggested to have insurance plan to start your financial planning and manage your finance well, if you have a insurance plan as per your family needs it makes financial security even when you are not around with your loved ones. So thinking out of the box a person should really initiate in the insurance plan for their betterment and for the sake of their families too. There are various facts which makes Life Insurance important for a person some are discussed below:
- Insurance provides you financial security and protects you by having a safety net
- Insurance makes sure to safeguards you and your family and the future goals
- It encourages savings as the best means
- It is an effective risk management tool
- Makes sure to provide peace of mind
Few benefits of life insurance are:
- Death Benefits
- Life Risk Cover
- Return on Investment
- Tax on Investment
- Tax Benefits
- Loan Options
- Life Stage Planning
- Assured Income Benefits
Advantages of Life Insurance
- Life insurance provides an infusion of cash for dealing with the adverse financial consequences of the insured’s death.
- Death benefits are generally income-tax-free to the beneficiary
- Cash values grow tax deferred during the insured’s lifetime
- Policy loans are income tax free
- A life insurance policy can be exchanged for another life insurance policy
- Cash value withdrawals are treated on a first-in-first-out (FIFO) basis.
- Life insurance policies are flexible
Some Advantages in Details
- Death Benefit - The insurance company provides help and compensation as a death benefit in case of anything happened to the insured, the full amount and the bonus is received by the nominee. Even some companies manage to offer monthly income, in case of old age or people who are near to retirement and have financial crisis.
- Valuable return on your investment - In India, advisors suggest to have a life insurance is really important not only to have financial help and protection but also to gain valuable return on your investment, many insurance companies offer such benefits in the form of benefits.
- Tax Benefits - One of the best part of having a life insurance is it provides many tax benefits for example- if you are an employee who receives salary and also that you have a life insurance policy you have the right to claim deduction under 80C.
- Availability of Loan - When there is the urgent need of money, you can take benefit of your life insurance policy, as you can take a loan against it.
- Guaranteed Income - Your family feels better and safe as you bring money regularly and that income helps these provide to cater to their needs. Some life insurance policies provide regular pay-outs, which helps to compensate coverage againstrisks.
- Security of Business - Few insurance companies give you an option to wherein if you have bought a policy and run a business, then your partner can have the right to purchase a share of the policy holder’s after the death of policyholder.
Disadvantages of Life Insurance
- Cash surrender values are usually less than the premium paid in the first several policy years and sometimes a policy owner may not recover the premiums paid if the policy is surrendered.
- The life insurance purchase decision and the positioning of the life insurance can be complex
- Policyholders forego some current expenditure to pay policy premiums
- The life insurance acquisition process can be annoying and perplexing.
CLAIM SETTLEMENT RATIO-
Claim settlement ratio in insurance is a total number of death claims approved by an insurance company out of the total number of death claims received by an insurance company for the financial year. The claim settlement ratio denotes the company’s ability to pay or make a compensation. Before going to have any idea about the claim settlement ratio one should first understand the insurance company’s perspective of having a streamlined and robust claim settlement process in place.
How does Life Insurance Work?
Life Insurance covers the risk of death. In case the policyholder dies during the policy term, compensation, as agreed in the life insurance agreement, will be paid to the designated nominee of the policy holder.
Premium paid towards life insurance investment qualifies for tax deduction under Section 80C of the Income Tax Act, 1961. The benefits paid out in a Lump Sum are exempt from income tax under Section 10 (10D) of the Income Tax Act, 1961.
TERM LIFE INSURANCE
Term life insurance provides coverage for a fixed period of time at a fixed premium rate. In case of uncertain death of the life insured the policy term, the nominee of the life insured gets the total payout or say benefit. The benefit can be paid out as a lump sum payout. So term insurance plans are a pure protection of your family which ensures financial stability and protection of the dependent in case of untimely death of the life insured. One of the benefit of term insurance is that the premiums paid for the term insurance are tax free under section 80 C upto an amount of Rs 1,50,000.
Remember terms when comparing term life insurance are total payout of each plan, premium amount paid for desired Total payout, policy term offered, high claim settlement ratio, riders offered with the plan.
Life Insurance is important as it protects your family and lets you leave them non-taxable amount at the time of death. It is used to cover your mortgage and your personal loans, such as car loans etc. It is said correctly that insurance turn accumulated capital into productive investments. It make sure to enable the mitigation of losses, financial stability and also make sure to promote savings. Every person has different needs hence they choose the life insurance as per their needs.
Basically there are three major types of permanent Life Insurance-
- Traditional whole life
- Universal life
- Variable universal life
Any permanent life insurance policy with a cash value, such as whole life insurance, can be treated as an investment, but people don’t understand the actual importance of life insurance. People should be aware that a life insurance is to provide a financial safety net for your loved ones in the event that you die prematurely. Term life insurance policy, which is affordable and is one of the right choice of insurance plan. When people go for life insurance plan they consider it as a protection from risk rather than an investment that will make money in the future. Life insurance is taken up by the people to secure the immediate needs of nominees in the event of the sudden demise/death of the policyholder, the sum insured is paid to his or her beneficiaries. As per the financial advisors it is a great plan to have a life insurance plan to keep a security and safety after the life of the policyholder for the people left in the family.
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TOP 10 LIFE INSURANCE COMPANIES IN INDIA
Here is a comparative list of Top #best life insurance plans in India –
- LIFE INSURANCE CORPORATION OF INDIA - Life Insurance Corporation of India is known as LIC is the largest life insurance company in India owned by the Government of India, it is among the top 10 Insurance companies in India. It makes insurance accessible for every person in the country with 2048 branch offices, 113 divisional offices, 8 zonal offices and 1381satellite offices
- AEGON LIFE INSURANCE LIMITED - AEGON Life Insurance Company Limited was established in July 2008 to provide life insurance to people to secure their future.
- AVIVA LIFE INSURANCE - Aviva Life Insurance Company is a joint venture between Aviva plc, a British Assurance Company and Dabur Group, an Indian conglomerate, ot is most trusted Private Life Insurance Brand for years.
- HDFC LIFE INSURANCE - HDFC Life Insurance Company, one of the top insurance companies in India, it offers a wide range of insurance and investment solutions to various customers.
- TATA AIG LIFE INSURANCE - TATA AIG Life Insurance Company is Asia’s largest insurance group, it offers various insurance solutions for unique insurance needs and it is well known for providing excellent customer services and satisfaction.
- BAJAJ ALLIANZ LIFE INSURANCE - BajajAllianz Life Insurance Company founded in year 2001 has 759 branches across the country to offer innovative insurance solutions to various and wide range of customers, well known for timely services and best services.
- MAX LIFE INSURANCE - Max Life Insurance Company founded in theyear 2000 is the largest non-bank private sector insurance company in India. It is among one of the fastest insurance company in India, it is one of the fastest-growing insurance companies in India.
- ICICI PRUDENTIAL LIFE INSURANCE - ICICI Prudential Life Insurance Company is having strong channels all over the country and multiple distribution channels, it offers long-term protection and saving plans for a wide range of customer segment.
- BHARTI AXA LIFE INSURANCE - Bharti AXA Life Insurance Company was founded in the year 2006. The company excels in financial expertiseanddomestic business which has made a really strong background for the company to deal with the needs of customers the company has designed various plans to cater to their needs and requirements.
- BIRLA SUN LIFE INSURANCE - Aditya Birla Sun Life Insurance Company, founded in the year 2000 is a subsidiary of Aditya Birla Capital Limited. It offers various insurance plans starting from protection plan to pension plan, saving plan and many new-age products.