First of all, you have to understand what is life insurance or term life insurance, and what is its main purpose. Home insurance to protect the house from any risk, car insurance to cover the loss due to an accident, but, is it not worth considering any insurance to give financial security to your family? Term Insurance, Money back, ULIP, Whole life Insurance.
The basic purpose of insurance. Providing financial security to you and your family. One way is that so you choose a term plan whose premium is very low. Which will provide cover after an accident or your death. But no one will give maturity. If nothing happens to you. With this your premium will be very less and you will be safe.
What is Term Life Insurance?
Life insurance is a contract between you and an insurance company. Essentially, in return for your premium payment, the insurance company will pay a lump sum amount as a death benefit to your beneficiaries after your death. Your beneficiaries can use that money for any purpose. Children’s education, marriage expenses, daily expenses, and other expenses can be met with this amount.
If a loved one is dependent on your income, or you want to ensure that they do not face any financial hardship in the event of your passing, life insurance may be considered.
Which is the best insurance. It depends on different persons. Insurance can be good for every person according to his/her circumstances. For some young people like whole life insurance, some people like ULIP is the best, some likes term life insurance as best life insurance plan. ULIP provides both investment with insurance. By doing ULIP your money is also invested in the market. And with that you also get cover.
Whole Life vs Term Insurance
Whole life insurance also known as permanent life insurance, provides this protection for the whole life, whereas term plan life insurance provides protection for a fixed period only.
Term Life insurance
Term life insurance “Term Plan” is a contract between a policyholder and an insurance company that states that if the insured passes away within the time period of the policy, the insurer will pay the death benefit to the named beneficiaries on the policy.
If you are buying term insurance, you have two main decisions: how long should the term be and how much life insurance do you need?
With level term life insurance, the annual cost of insurance remains the same for each year term. Once the term expires, you can generally renew the policy, but at a higher rate each year you renew.
If you outlive the length of the policy without renewal, the policy expires. No refund is available unless you have purchased any policy type, unless you have purchased Return of Premium Term Life Insurance.
Term life insurance Benefits
If the policyholder unfortunately dies during the policy term, the sum assured is paid to his nominee (his family member dependent on the policyholder).
If the policyholder survives for the entire policy term, then no amount is paid to him or his nominee (family member). In pure term plans, no amount is given after maturity and hence you get these plans at very low premiums.
Income Tax Benefit
Every year from your taxable salary ₹1,50,000 is exempted under section 80C of Income Tax on premium payment. The death benefit received by the nominee is also exempt from tax under Section 10(10D) of Income Tax.
Whole life insurance
Whole life insurance is a type of permanent life insurance that can provide lifelong coverage. It offers a variety of guarantees, which can appeal to someone who doesn’t want any guesswork after buying life insurance.
Whole life insurance combines an investment account called “cash value” and an insurance product. As long as you pay the premiums, your beneficiary can claim the policy’s death benefit upon your death.
Now health insurance is a different thing. It is mandatory for everyone to take it separately. And you should take according to your capacity. Taking health insurance is easy nowadays. But before taking it, all its term and condition should be known from the agent. And it should be taken after being informed.
However, the purpose of life insurance is to get the benefit of lump sum amount to the dependents of the insured after his death. By mixing this objective with the purpose of refund, the purpose of insurance is lost somewhere. You may get financial benefits after a certain period of time but, instead, you will pay higher premiums and you will get less profit as compared to other investments.
Query in your mind
– Insurance protects the financial condition of the house from deteriorating in the event of an accident with the earning member.
– The sum insured must be at least such that some can become a substitute for your current income.
– Do not mix insurance scheme with savings plans, keep both separately, if possible, take a term plan.
– And most importantly, take the maximum amount insured according to the maximum amount that is possible to pay in installments (premium), so that the increasing future expenses can also be covered in it.
– Also take medical insurance, so that any accidental illness can also be treated.
Life insurance should not be mixed with investment. In doing so, the fulfillment of both the objectives is lost. Neither good return on investment nor risk is met with the amount invested.