Life Insurance Policy Explained

by Reahan Sharma Writer

What is Life insurance Definition

Life insurance is one of the oldest and the most popular insurance policy amongst all the other insurance policies. It is the financial protection given to an individual and his family against his own life. The policyholder who buys the Life insurance policy pays a certain sum of money regularly to the insurance company which is known as a premium. In return, the insurance company pays a lump sum amount to his beneficiaries in case the policyholder dies within the policy period. If the policyholder survives the insurance term, the insurance company returns the amount paid by the policyholder along with a bonus and some add ons.

What are the benefits of a Life insurance policy

It provides insurance cover for life with added benefit of savings.
In the event of the death of the policyholder, this insurance fulfils the dreams of the family of the policyholder like higher education for children or marriage of the children, payment of loans and other related issues.
Facility to take loan against the premium paid.
Also covers hospitalization and treatment.
Income tax rebate on the amount of premium paid

How many types of Life Insurance are there

Whole life insurance- insurance cover for the entire life, partial withdrawal facility available and also includes survival benefits.
Endowment plan- death benefits to the beneficiaries along with survival benefits to the policyholder.
Term insurance – this insurance is for a fixed interval of time. Only death benefits are provided and no survival benefits.
Money back policy- a fixed sum of money is given back to the policyholder at regular intervals of time after completing a certain time period in the policy.
Unit-linked plan- a part of the sum paid by the policyholder is invested in the market and the remaining amount is for life insurance Money invested grows in a due course of time.
Child plan- Life insurance plan with added benefits of secured child future.
Pension plan- this policy gives a certain portion of accumulated money as a lump-sum payment, and the rest is given in the form of pension.

Things to keep in mind before taking a plan

Having a clear understanding of life insurance meaning helps in selecting the right insurance plan

Life insurance has become very competitive after the entry of various players in the market. A lot of nearly similar plans are available under different names under different insurance companies. Always compare the plans based on its affordability, its premium and its facilities before making a choice.

Check for the policy lock-in period that allows a policyholder to change his decision within a certain period, in case certain things in the policy do not match his requirements or needs.