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A life insurance policy is a contract between an individual and an insurance company, stating that the insurer will offer financial protection to the policyholder's family in exchange of a specific amount (known as premiums) to be paid by the life assured during the tenure of the policy. Life Insurance is a financial product wherein the insurance provider agrees to pay you or your dependants a sum of money in the event of death of the policy holder or, if the policy matures.
Life is uncertain. While death might be the last thing on your mind right now, you can never rule out uncertainties. Should anything happen to you in future, your family might end up struggling financially in the absence of your income. A life insurance cover ensures that your family is well protected against such financial challenges in your absence.
These plans are taken to build a corpus for future goals like education and marriage. In these plans a lump sum amount is paid generally on achieving certain milestones in a child's life. They also provide waiver of premium benefits in case of untimely death of the insured parent with all the policy benefits continued.
Term plans are the purest form of Life insurance. They are low cost, risk-free policies with highest coverage that are purchased for a fixed period of time. They provide a fixed amount to the beneficiary in case of the policy holder's death.
ULIPs or Unit Linked Insurance Plans are connected directly to the Capital Markets. Under this scheme, a part of the premium paid by you is utilized to offer you life insurance cover and the other part is reserved for a common pool of funds, which invests in debts, equities or a combination of both these funds. Since the returns are dependent on the performance of the markets, there are chances of you getting higher returns than that of traditional insurance plans. Return on investment in ULIP is subject to market and other associated risks.
An endowment policy is designed keeping both the life and death benefits in view. Known primarily as a savings-oriented plan, an endowment life insurance cover pays out a lump sum after a fixed period upon death or upon maturity. Depending on a specified age limit, the tenure of an endowment policy might vary between 10, 15, 20 years or so. The death benefit, of course, extends to the nominee in the event of the policy holder's death. The life benefit is given to the policyholder if he/she survives the maturity period.
In a money back plan the policy holder receives a percentage of the total sum assured as guaranteed payouts. These payouts are made at fixed intervals which are pre defined at the time of issuance of policy.
Whole life plans cover the policyholder for a lifetime or in some cases upto 100 years of age. Insurance provider pays the nominee the whole amount in case of any unfortunate event or to the policyholder at the time of maturity including all the bonus as well.
These plans help in providing financial security post retirement. They also help in accumulating savings over a longer time period and provide financial stability for the future. Pension plans help in building a corpus to ensure steady flow of income post retirement.