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What Are the Characteristics of Life Insurance?
Human life is susceptible to uncertain incidents that can disrupt the flow of life of closely associated individuals. Therefore one chooses a life insurance policy to safeguard the financial requirements of their family when they are not around anymore.
Life insurance policies are available in various formats, often confusing buyers who aim to get the maximum coverage per their budget. Thus to ensure peace of mind, you must know the characteristics of life insurance policies so that it becomes easy for you to choose one.
6 Key Characteristics of Life Insurance Policies
1. Life Insurance Policies Provide Long-Term Financial Security
The insurer allows a policyholder to avail life insurance benefits for an extended period ranging from 10 to 30 years. This tenure is referred to as the policy term. The insured person must pay a pre-agreed premium throughout this period to ensure that their beneficiaries receive the assured cover if they pass away.2. The Policyholder/ Life Insured Must Enlist Beneficiaries or Nominees
When applying for a life insurance policy, you must list the names of beneficiaries. The nominees can be your parents, spouse or children, whomever you choose. If you have not selected any nominee, the legal heir is automatically entitled to be awarded the guaranteed sum after your demise.3. Premiums Can be Furnished Monthly, Annually or Even Settled Through a One-Time Pay
Depending on your budgetary constraints, you can negotiate with the insurers regarding a favourable payment method. In return, the insurance company will provide insights and guide you through actions likely to reap the maximum benefits at an affordable price.
Nowadays, more premium solutions like bimonthly, quarterly and half-yearly payment structures have also been introduced.
4. Depending on the Type of Life Insurance Policy, It Can Be a Post-Retirement Solution
Specialised annuity plans provide lifelong monthly payouts based on the sum accumulated from paid premiums. For example, suppose you intend to contribute more actively to your retirement fund corpus. In that case, you can buy these insurance policies that generate a regular source of income instead of a lump sum amount.5. The Sum Assured Is Free of Taxes
The compensation provided in the form of death benefits is fully tax-exempt except in some cases. Moreover, the bonuses accumulated throughout the policy term are tax-free as per Section 10(10D) of the Income Tax Act.6. Life Insurance Can Provide Protection Against Critical Illness and Permanent/Temporary Disabilities
When combined with a term plan, effective riders can help protect the life insured as well as safeguard their family's financial needs. One of the critical characteristics of permanent life insurance policies is that you get the option of clubbing add-ons like critical illness coverage or disability benefits. Upon adding these particulars, if you, unfortunately, lose your job due to a temporary disability caused by an accident, you or your beneficiaries can file a claim for the sum insured.FAQs about Characteristics of Life Insurance
What are the actual benefits of owning a life insurance policy?
The main benefits you can enjoy after buying life insurance are:
- You do not need to worry about the living expenses of your family.
- Insurers often cover treatment costs of critical illness, so you do not need to worry about medical expenses.
- You can reduce taxable income and plan for post-retirement life systematically.
Under what circumstances life insurance companies can reject claims of death benefits?
What are the types of life insurance?
What should I consider when choosing a life insurance company?
Do term insurance companies offer long-term plans with flexible options?
Important Guides Related to Life Insurance
Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
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