Rajeev was securing money for his new restaurant. He got married to Neha last year. Then they both invested their whole saving in the startup of Rajeev. They even took a loan from the bank. It was all going smoothly, slowly. Just then Rajeev met with a road accident and lost his life. Neha was all lost, with no economic support and security. Along with trauma of Rajeev’s death, she was in the burden of bank loan and no financial security. She had to take support from her old parents in order to get rid of the loan amount and she even sold the restaurant in the loss. Instead of being strong and facing the situation of loss with Rajeev’s family, she was feeling like a burden on the head of them.
This is not a rare story, but it can happen to anyone. Character and plot may change but, the loss that is caused due to the untimely death of the earning head of family cause trauma financial, mental and socially. If Rajeev was not short-sighted and he behaved in an aware manner, Neha might have avoided this entire crisis. The solution is life insurance.
There are various insurance policies in the market and one of the most important insurance is the Life insurance policy. Life Insurance in India is emerging as most popular insurance among the masses. It is basically a contract which is signed between a person and insurance company, wherein the insurer promises to pay a fixed sum of money (sum assured) to the family or nominee in case of the insured’s death. The insured person has to pay a certain amount to the insurer as premium towards maintaining the life insurance policy. The primary purpose of a life insurance policy is to protect the financial interests of the insured’s family in his or her absence. While looking for life insurance, policyholder needs to be aware of basics terms. There are basically three aspects of life insurance that a person should know:
Premium – A person is liable to get the cover, only if he/she accepts to pay a fixed amount towards the policy. Such amount of money is popular by the name of premium. A person can take it as an initial investment that offers the required financial assistance in return.
Death Benefit/Sum Assured – It is the sum of the amount that the insurer promises to pay to the nominee/beneficiary of the insured after his/her demise. It varies according to the different number of parameters.
Term/tenure – An insurance plan offers the required protection for a fixed tenure. It could vary according to the type of chosen policy.
In India, there are different forms of life insurance policies. Insurance companies of the market offer a wide range of products that can be categorized into six broad forms such as:-
- Term Insurance Plans – Term insurance plans refer to be the purest and effective form of life insurance policy. Under the same, the insured is covered for a fixed time period. In term insurance plan the nominee/beneficiary as stated in the policy document will get the required financial assistance in case of the insured’s demise. It helps your family to deal with financial trauma in case of your death. A persona should definitely invest in the same to secure the future of the family in case of his/her death.
- Unit Linked Insurance Policies (ULIPs) – If a person is looking for a plan that can offer the required cover along with good returns then he/she must invest in a life insurance policy. Such products are market-linked products like bonds, mutual funds, stocks, etc. A certain amount of risk is there with ULIPs.
- Endowment Policies – Such policies are not limited to life cover, but it also offers the saving component that you can use to cater to other future needs. It serves a dual purpose. Because of such effective features, the premium of this plan is comparatively high.
- Whole Life Policies – It is an effective form of insurance plans that also provides the benefit of investment plans. Under the same, a death benefit is offered to the nominee in case of demise of the insured. A few insurance companies carry an age limit
- Pension Plans – Pension plans are also popular by the name of a retirement plan or annuity plan. You can invest in the same to secure your retired life. They are basically single premium policies that offer huge benefits.
Out of all the available life insurance policies, an invest in term insurance is a must thing. It will provide the needful financial support to your family in case of your demise so that they can easily deal with the financial and mental trauma.
One should choose an effective term insurance plan so that he/she can be ready to face the unpredictability of life which can cause irreversible damage to your loved ones.
A good term insurance plan not only minimizes the financial burden on the head of the policyholder but also help the near and dear ones. With a good life insurance plan, not only you will live a stress-free life but you will be tension free for the well being of your family in your absence.