How does life insurance work? It’s a kind of insurance from which a payout is received on the policyholder’s death or after a set period. This depends on the chosen type of life insurance policy. Term life insurance offers coverage for a certain period, usually 10-30 years and acts as an affordable and simple investment option. Whole life insurance lasts for a whole lifetime and has a cash value component subject to growth over time. Here are the features of life insurance in India.
Characteristics of Life Insurance
The Policy is Issued in the Name of the Policyholder
This is a primary characteristic of life insurance. A policyholder buys the plan and pays the required premiums. There is only one policyholder for a typical life insurance policy. However, a joint plan allows you to have multiple policyholders.
Payout on Death or Maturity
The insurer pays the sum assured upon the maturity of the plan or the death of the policyholder. This is how life insurance works. The kind of payout depends on the chosen type of life insurance. For instance, for pure term insurance policies, payouts are made only on the policyholder’s demise.
When the insurance provider pays the sum assured in the case of your death, the payout is called a death benefit. When you yourself receive the payout on the plan’s maturity, it’s called a maturity benefit.
Protection for Dependents
It’s best for the breadwinner of a family to buy a life insurance plan and assign nominees. Then they would be entitled to get the sum assured in the event of your unfortunate demise. Ideally, family members who depend on you financially should be chosen as nominees. They can get a lump-sum payout from the insurer as a death benefit in your absence. This can help protect the dependents financially.
Help for Repaying Any Outstanding Liabilities
If you have unpaid loans or credit card bills, your family would have to bear the burden of repaying the outstanding liabilities in your absence. If you remain alive, you need to repay the same. However, life insurance can save you. If you get a death benefit or maturity benefit from life insurance, the amount can help clear the debts.
Premium and Sum Assured
You need to pay premiums to the insurer to enjoy a life cover in return. You can pay the same as a lump-sum amount or in broken amounts at regular intervals like monthly, quarterly, half-yearly, or yearly.
The sum assured is the payout given by the insurance providers. You can customise the sum assured when you buy the insurance plan. For instance, if you wish to have some optional covers in the form of life insurance riders, you can opt for a higher sum assured.
Choose a reputed life insurance provider in India and compare the benefits of different policies to choose the most suitable one. Use the online insurance calculator to check the premium payable and ensure that it fits your budget and is worth the sum assured.