Life insurance is one of the primary lines of defence in this day and age when uncertainty is all around us. From pandemics to economic instability, everything affects your life in one way or another. In such upheaval, one thing that you can truly rely on is a suitable life insurance policy that will take care of you and your loved ones in your time of need.
What is a life insurance plan, and how does it help?
A life insurance plan is an assured financial aid for your loved ones. When you buy a life insurance plan, you select a sum assured, which is the amount the insurer will provide to your beneficiaries—your loved ones whose future you may be concerned about. You need to choose the tenure of your policy, and if an unfortunate demise befalls you during this specified period, the insurance provider will pay the sum assured to your beneficiaries.
There are several benefits to having a suitable life insurance plan for you and your loved ones:
- The beneficiaries receive a lump sum amount of money as the death benefit. They can use this money to overcome financial challenges in everyday life or to plan their future without you. They can also repay outstanding loans, mortgages, or small debts or invest toward a viable source of income.
- If you survive the tenure of your life insurance plan, then you receive the maturity benefit, which you can use to overcome other financial setbacks or set up a new life insurance plan. You can also optimise your financial plan for you and your family.
- You can use life insurance plans to live comfortably in your golden years with a retirement fund.
- You can earn money from your life insurance plan with specialised policies that support smarter investments.
- You can meet several financial goals during the course of your life with different life insurance plans and set up the future for your loved ones.
In truth, life insurance plans are safety nets that allow you to live vicariously, knowing that your loved ones will be well taken care of even in your absence.
What are the different life insurance plans in India?
Initially, life insurance plans were all about providing a death benefit to your beneficiaries in case of an untimely and unfortunate demise. Despite losing someone they love, who may have been the primary wage earner, your family would be financially stable. However, with time, life insurance plans have evolved to befit the growing needs of mankind.
Here are the top life insurance plans in India:
- Term Life Insurance –
The term plans are the simplest and most affordable life insurance plans wherein you choose a tenure of 10-100 years and a sufficient sum assured to take care of your family. They offer death benefits to the beneficiaries in case they meet a premature demise. With some term insurance plans that offer a return on premium, you can receive the premiums you paid over the years when the plan matures if you survive the tenure of your policy. - Endowment life insurance plans –
These policies offer death benefits to your beneficiaries in case of your premature demise. They also pay you the maturity benefit if you survive the tenure of your policy. Essentially, they are excellent means of habitual savings that have built a corpus for you over the years. - Money-back plans –
These are special life insurance plans where you pay the premiums, and your beneficiaries receive the death benefit in case of premature death. You can also choose regular intervals during which the insurance provider will pay back part of your premium in lump sum amounts. You can use that money for your financial planning. If you survive the tenure of your plan and the policy matures, you will receive the remaining amount you paid in premiums minus the sum that was already paid to you at regular intervals. - ULIPs –
These are ultra-cool life insurance plans for those who want to reach their financial goals during their lives and still have a corpus set aside for their loved ones after their demise.
ULIPs offer the sum assured to your loved ones in case of your premature death and pay you maturity benefit if you survive the tenure of your life insurance plan. But there’s more.With ULIPs, you can also invest part of your premiums into market-linked investment instruments or risk-free investment plans and earn interest and profits from them. You can withdraw the profits periodically or when you are in a financial crunch.
- Pension Plans –
You can set up your life insurance plans with pension policies that help you build a corpus for your golden years. You can receive this pay out after your retirement as a lump sum amount or as monthly income based on the type of pension plan you choose. - Child-oriented life insurance plans –
If you have children, you can set up a life insurance plan to help pay for your child’s education, marriage, or other goals. When the plan matures, your child will receive a lump sum amount of money to aid them with their financial goals. In some cases of your premature demise, the premiums may be waived.
You can choose life insurance plans based on your specific needs and that of those you love.
What are life insurance tax benefits?
The premiums you pay towards life insurance also offer tax benefits. Here are some life insurance tax benefits to consider:
- If your annual premiums are less than INR 1.5 lacs, the amount is exempted from taxes under Section 80C and Section 10 (10D) in the case of ULIPs.
- If you qualify for an illness or disability specified under Section 80DDB or 80DU, your premiums are deductible if they are less than 15% of the sum assured.
- The death benefits that your beneficiaries receive are exempt from taxes.
- The maturity benefit is exempt from taxes under Section 10 (10D) under the conditions that apply.
Therefore, life insurance tax benefits can be an incredible means to save money.
Conclusion
If you only want to secure the future of your loved ones, you can go with term plans. If you want to get your money back as a reward for living a healthy life, you can go for term plans with return on premium and endowment plans or set up your retirement years with pension plans. If you want to use your life insurance plans as a safety net for times of financial setbacks, you can go for money-back plans. If you wish to earn money from your premium investments, ULIPs are excellent investment options. Not to mention, the life insurance tax benefits help save more money.
