What is life insurance?

In today’s run-of-the-mill life, don’t know when what might happen to someone? In such a situation, if there is only one earning person in a person’s house and that person meets with an accident and dies, then their family has to face financial problems.

Life insurance comes in handy to avoid such situations. Due to which any person’s family gets financial help after that time increase.

Read More:- What is Vehicle insurance?

What is life insurance?

Life insurance is a contract between the insured (the insured) and the insurance company. In which the insured person has to deposit a fixed amount or premium in a fixed period (like 1 month, 3 months, 6 months, or 1 year etc.) to the insurance company. Under this insurance, the person who has been insured has any accident at any time and dies, then the insurance company pays a lump sum amount to the insured person or the family of the insured. Life insurance works as a financial support. Which provides financial assistance to the people dependent on you. Life insurance acts as a financial backup plan for you and your family. It helps you to be financially prepared in case anything mishap happens to you.

How does life insurance work?

There are many types of life insurance policies. And any person can choose a life insurance policy according to his requirement. And you should take such a life insurance policy that suits you. Life insurance is a contract between the insured and the insurance company. In which you can choose the insurance of the right plan according to you.

After choosing the insurance, you get a fixed cover for a fixed period of time. For that cover, you have to pay a premium to the insurance company. You have to pay this premium for 1 month, 3 months, 6 months, or 1 year.

After that if the insured person i.e. the insured dies due to any reason, then a lump sum amount is paid by the insurance company in the form of sum assured i.e. insurance cover to the family member of the insured person. This amount can be anything according to your insurance. The beneficiary can use this amount in any way.

Types of life insurance

There are 8 types of life insurance in India. The insured can choose his insurance according to his need. Let us know how many types of life insurance are there and what are their names?

Term life insurance

Term Life Insurance It is a type of life insurance that allows payment of a fixed amount as death benefit in case of death of the life assured during a specified period of time.

Term life insurance is also known as simple and pure life insurance. Once its term is over, the policyholder can either extend it for another term, or allow the life insurance policy to lapse.

Unit linked insurance

Unit Linked Insurance Plan is such an insurance plan in which the facility of both investment and insurance is available. Whatever person is insured under this insurance, a part of the premium paid by this person is used for insurance while the other part is invested.

In this, on the basis of taking the risk of the person insuring, you can take this insurance according to the plan given by different companies. In this, the money deposited by the insurance company is used to buy shares and equity.

Whole life insurance policy

Whole life insurance plan is a permanent life insurance. That is, this life insurance gives the facility to insure the whole life for the person. Or in some cases the facility to insure till the age of 100 years.

While buying this type of life insurance, a fixed amount is fixed, which is called Sum Assured. After that the insured has to pay the premium according to that sum assured.

After that, if that person dies in any way, then the sum assured as decided by the insurance company is paid to the nominee of that insured.

Money back plan

In money back life insurance, apart from the lump sum sum assured, the insured person gets some part of the sum assured at regular intervals.

In case of death of the life assured, the entire sum assured plus bonus (if any) is paid to the nominee.

This insurance is perfect for risk averse individuals. In this type of insurance policy, the insured can also make savings. In this way the insured can fulfill his short term financial objective.

Child insurance policy

This insurance plan is specially made for children. This insurance scheme is useful for the future development of children and their better future. This insurance gives the benefit of financial assistance in marriage, education and other expenses of children. It is also known as investment and savings policy. It secures the future of the children financially. In case the insured dies due to any unfortunate reason, a lump sum amount is paid to the family of the insured. But even after this this insurance does not end. And all future insurance premiums are waived off. The insurance company continues to pay premiums or investments on behalf of the insured and the insurance continues for its specified term.

Pension and Retirement insurance

This plan helps you financially support your post-retirement life. This is a retirement or pension plan, you do not get life insurance cover under this plan.

To plan your retirement, there are many pension plans available in the market, these plans may differ from company to company.

By choosing the right scheme, you can create your own retirement corpus by assessing your risk appetite. After this, after the fixed period according to your plan, you are paid a fixed amount in the form of pension. This payment amount can be on one month, three months, six months or year basis as per your plan.

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