In the event of the demise of a family member, the last thing on your mind is money. However, a solid life insurance policy is an undeniable financial tool that can help his or her loved ones get some monetary aid to move on with their lives free of undue financial burden. Buying a life insurance policy is a smart choice but also an emotional one as one is preparing to protect their loved ones after their death while they are alive. There are many types of life insurance policies that provide a large number of benefits that act as money cover and both an investment and insurance. Have an in-depth look at how you can buy one along with features to be able to make an affirmed decision on which is the best for you and your loved ones.
What is a Life Insurance Policy?
A life insurance policy is a financial tool that gives you a combination of savings and advantages under the same plan. A practically mandatory purchase, a life insurance policy helps provide financial help to the beneficiaries of that policy, a fool-proof plan to ensure the well-being of family members one has left behind. While it does require a payment to be made, you can get one that allows you to invest in market-linked funds and other investment opportunities. Often, in case the policyholder outlives the time of his policy's date, the final amount that he/she gets back is much higher than what was paid, acting as a good kitty for your golden years.
Features of a Life Insurance Policy
Mentioned below are key features of a life insurance policy in India
- Option of investment as well as insurance under one cover
- The policyholder can choose to flip between different covers after the completion of a specified time into the policy
- You can choose to take partial withdrawals after you complete a lock-in period of 5 years minimum
- Partial withdrawals can be free of any charges up to a certain limit
- Policyholders can opt for a debt fund at the end of the policy
- The sum assured at death is guaranteed under a life insurance policy
- Maturity benefits are available to the policyholder if he or she outlives the policy
Benefits of a Life Insurance Policy
Have a look at a few main advantages that a life insurance policy will give you.
- Investing in a life insurance plan inculcates disciplinary savings, which can help to achieve long term goals that require finance.
- It protects the policyholder's family members in case of his/her untimely demise by providing them monetary aid.
- Loyalty additions and fund boosters are provided with long-term LIC policies.
- Growth of wealth is promoted over time.
- Tax exemptions are provided with investments on life insurance policies
- Mortality charges are returned at maturity in some life insurance policies
How Does a Life Insurance Policy Protect Family Members
While we have covered a generic idea of how a life insurance policy helps protect the financial interests of family members, the below-stated points of how it does so will help give a clearer idea.
1. Offering Financial Stability
In case the policyholder is also the breadwinner of the family, his death can cause more emotional turmoil than a normal person. Family members are distraught at the loss of a loved one and are barely able to come to terms with this loss, and additional financial burden can cause further chaos. When the deceased person has a solid life insurance policy, he/she can ensure that his/her family will get paid the promised amount by the company so that they will be able to live a comfortable life – one they are accustomed to.
2. Monetary Aid for Crucial Costs
One of the most prolific advantages of a life insurance policy is that it provides life coverage and offers great returns at crucial stages of life, if any. Certain plans offer a lump sum payment at the time of retirement, so you can use it when you need it the most. Others offer large payments for times of need, such as your children's educational expenses and so on.
3. Help During Difficult Times
Many life insurance policies are designed to provide monetary aid during difficult times that generate undue expenses such as hospitalization due to an illness, accident, medical expenses, legal charges in case of some legal issues, funeral charges in case of death, etc. Such times are tough on family members as liquidity of funds is not easy. A life insurance policy that helps cover such expenses is a boon in disguise.
4. Loan Cover Benefits
Taking loans is a common occurrence among people. There are home loans, business loans, personal loans, and so on. In case a loan borrower dies unexpectedly, the burden of repaying the loan falls on to his or her dependents. This can add to a lot of undue pressure on them. In case the borrower has a foolproof life insurance policy against his/her name, the insurer ends up paying the sum assured to his/her beneficiaries. The amount can be used to repay the borrowed loan. Anyone taking loans should keep this in mind before he/she does so.
5. Leaving an Inheritance
When you name a beneficiary to your life insurance policy as an heir, that person shall receive the sum assured on the policyholder's death. In case the beneficiary does not need the money, he/she can donate it to charity. This can be done by naming the charity after you, which typically means that you will be the owner of that charity and have access to its funds along with its cash value while you are alive. You will also be eligible for charity tax deductions. In case of death, this tax exemption will not be applicable.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.