Life Insurance Basics- All you Need to Know

by Viney Kumar Freelance Writer & blogger There are some things in life about which there are no two ways. Things like food, house, family, money are things that are essential for leading a normal life. Another entity that should be added into this category is the life insurance. You all would definitely agree that worries regarding the safety of your valuables, money and on top of all your family are an inseperable part of our life. Life insurance takes away these tensions from your life and lets you live worry-free. It lets you leave a legacy behind for your family which is dependent upon you. It takes care of the financial needs of your loved ones if unfortunately, in case, you are not there for them. Well, allowing you to leave behind a legacy is not the only purpose of an insurance, Instead, there are a lot of different purpose for which people buy them such as child’s education, marriage, as a source of regular income post-retirement, saving for buying a house and a lot more. And in order to provide you an insight into the basics of Insurance, we have compiled some useful information which is precise and crisp enough to keep you adhere to the topic and not fly away from it. We are going to discuss about the types of insurance and their purpose along with the several terminologies that are frequently used whenever we talk about insurance. Moreover, as we’ll progress, you will also be informed regarding which policy vendor offers which service better. For example, Exide life insurance provides a lot of options for both term insurance and whole insurance.

What is Life Insurance?

In the most generic form, Life Insurance can be termed as an agreement between the customer and the insurance company according to which in return for the premiums paid by the customer to the company, the company will provide a lump-sum money to the family of the customer or whosoever is the nominee which is known as death benefit.

What is the need of life insurance?

Most of us understand the importance of life insurance but not a lot of us actually own one and therefore, we feel the need to talk about the importance of Life insurance. Have you ever wondered how your family would survive in your absence? Or who is going to take care for their financial needs if the primary earner happens to die suddenly? Well, there are a lot of reasons for buying a life insurance plan for yourself and you might be aware of them very well. So, before proceeding further, it would be nice if you think about buying a life insurance plan again. We are not selling you any particular plan from Exide life insurance or HDFC, instead, all we want is you to get a life insurance.

Basic Terminologies of Life Insurance

Life insurance is not a subject that we get to learn from our teachers (atleast for most of us) and thus, there remains a lot of fog around the actual understanding of Life insurance and its terminologies. In order to help you out in this regard, here is our explanation of the various terms related to Life Insurance.

 

1.   Beneficiary

Beneficiary is the person who the insurance buyer nominates to get the distributions from the Life insurance policy.

2.   Coverage

Coverage refers the range of protection services that are covered under an insurance plan contract. In other words, it refers to the various risks that are covered by the policy.

3.   Death Benefit

Death Benefit indicates the amount that will be received by the beneficiary in case the owner of the policy happens to die. The amount can be paid either as a monthly pension or as lump-sum.

4.   Age Limit

It specifies the minimum and the maximum age limit, below or above which the policy holder cannot renew the policy or the company will not accept the application for a new policy.

5.   Assignment

It is the process of transferring the authority of principal beneficiary to a lender, in case the borrower is unable to pay for he policy. In case of death of the policy holder the first benefit is paid to the lender and the balance if any, is paid to the former beneficiary.

6.   Days of Grace

It indicates the extra number of days after the due date of monthly premium payment during which no extra fee will be charged by the company.

7.   Exclusions

It refers to the certain services that will not be covered under the policy agreement.

8.   Maturity

It refers to the time period after which the policy holder is paid the promised amount of the life insurance plan. The policyholder is authorized to collect this amount in case it is not collected by the beneficiary beforehand in case of sudden death of th policy holder.

Types of Life Insurance Policies

All in all, there are six major types of Life insurance plans which are given below:

1.   Endowment Policy

Under this policy, if during the tenure of the policy, something happens to the owner, then the beneficiary receives the benefit, else, after the maturity the policy holder can himself receive the lump-sum as promised initially.

2.   Term Insurance

Under this plan, if the owner survives during the tenure period, no benefit is paid whatsoever. But, if during tenure period, if something unforeseen occurs, the beneficiary receives the partial or whole benefit.

3.   Money Plans

This is similar to a pension plan where the sum assured is paid to the insured in the form of periodic payments. However, the death benefit is covered for the entire amount irrespective of what has been paid already.

4.   Whole life Insurance

Unlike term insurance, the whole life insurance plans provides you coverage for the whole life and not only for the tenure period.

5.   Children’s Policy

These policies are taken for the benefit of the children in order to move finances when they reach a certain age.

6.   Annuity Plan

These plans offer a regular source of income post retirement, in other words, it serves as a pension plan. Immediate annuity pension plan from Exide Life insurance is a popular annuity plan.

7.    ULIP Plan

ULIP Plans (Unit-Linked Insurance Plan) is an insurance plan that offers the triple advantage of comprehensive protection, investment opportunity and tax benefits. It allows the insured to reap the benefits of investing in the capital market and maximize their wealth while enjoying a comprehensive insurance coverage that protects them against all financial adversities.

Conclusion
So, we talked a lot about life insurance and its basics. We hope that you got some useful information out of it. All in all, what matters is that you make up your mind for getting a life insurance unless you want your family to struggle in your absence.

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Created on Aug 10th 2018 07:34. Viewed 190 times.

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