In simple terms, life insurance is an agreement or a contract that you get into with an insurance company. You will be required to pay an agreed amount to the insurance company on a monthly or yearly basis. This amount is referred to as a premium, which is to be paid to the insurance company for a specified number of years.

In the unfortunate incidence like death, the insurance company pays a pre-decided, tax-free, lump-sum amount to a member of your family that you nominate, so that your absence does not hinder the financial standing of your family.

The amount that is insured to you and the premium that you must pay depend upon the life insurance policy that you choose. A higher premium amount entails a higher coverage. Life insurance policies are designed to secure a stable future for your loved ones in your absence.

How does life insurance work?

First, you must choose a life insurance policy that suits you. If you’re married and have children, a policy that promises a higher coverage will be beneficial to your children’s smooth upbringing and more importantly, their education. A higher coverage also means that you must pay a higher premium amount. Depending upon the terms of the policy, you can either pay on a monthly or yearly basis.

In the event of an untimely demise, the person you nominate must present the life insurance policy to the insurer and file a claim. He or she needs to submit a death certificate as well as other documents like proof of identity along with the insurance policy. The insurance company shall then, after making sure that no foul play is involved and everything is in order, pay the insured amount to the nominee in total.

Thus, your family’s future is secured and they can realize their dreams even after your absence.

Types of Life Insurance and their working:

  • Whole Life Insurance
  • When you opt for a life insurance policy that lasts you your entire life, it is called as whole life insurance. As long as you keep paying your premiums and do not surrender the policy, a whole life insurance will remain active well into your old age up until your demise, when the death benefit will be paid to your loved ones.

  • Term Life Insurance
  • In contrast to the whole life insurance policy, a term life insurance policy lasts for a previously specified number of years. Once the term of the policy ends, the policy expires.

  • Unit Linked Insurance Plan
  • A Unit Linked Insurance Plan is a type of insurance policy that has some investment options clubbed with it. When you pay the premiums, some part of your premium is invested by the company into funds of your choice, which can be equity funds, debt funds or any other.
Final word

If you’re the sole breadwinner of your family, your unfortunate passing away can bring your family’s finances to a standstill. And it is here where a good life insurance policy can be quite worthwhile. You have paid your premiums regularly, and in your absence, your family will reap the benefits of your actions. This will insure that you play a significant role in your family’s well-being during your presence as well as in your absence

Learn more about different Online Term Insurance Plans here.

DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



Trending Articles

Popularly Searched Terms

Endowment Policy

Money Back Policy

Pradhan Mantri Jeevan Jyoti Bima Yojana

Term Life Insurance

Unit Linked Insurance Plan (ULIP)

Latest Articles

life-insurance
life-insurance

Services You Should Expect from a Life Insurance Company or Intermediary

Read More
Posted on 01 June 2020
life-insurance
life-insurance

Your 5-Point Guide for Buying a Suitable Life Insurance Plan

Read More
Posted on 27 May 2020
life-insurance
life-insurance

Cancellation of Term Insuring During Free Look Period

Read More
Posted on 27 May 2020

Featured Articles

image abc-of-personal-money
abc-of-personal-money

Are Millennials Any Different When It Comes To Planning Financials?

Read More
Posted on 05 February 2020

Relevant Articles

image life-insurance
life-insurance

Services You Should Expect from a Life Insurance Company or Intermediary

Read More
Posted on 01 June 2020
image life-insurance
life-insurance

Your 5-Point Guide for Buying a Suitable Life Insurance Plan

Read More
Posted on 27 May 2020
image life-insurance
life-insurance

Cancellation of Term Insuring During Free Look Period

Read More
Posted on 27 May 2020