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Life Insurance: Definition, Types & Benefits

Author: Team Finpage
Wednesday, August 02, 2023

Life comes with its own risks and challenges. There are ways you can manage them with the proper support; such as life insurance for example. Life insurance is a crucial investment to secure the future of your family. Here is a quick rundown to help you understand life insurance better and how it can benefit you in a fundamental way.

Understanding Life Insurance

Consider life insurance as a legally binding contract between a policyholder and an insurance company. As per the contract, the insured pays the insurer a sum of money (premium) in exchange for a lump sum payment made to his beneficiaries in the event of his/her death. This is usually an amount paid to the insured’s loved ones after the insured policyholder's demise. For a grieving family, this helps them create a financially independent future. It is ideal for the sole breadwinners of their family or those with dependants who are senior citizens.

Types of Life Insurance

Everyone has different needs for their future. Life insurance comes in many types to better accommodate the needs of the policyholders. These are the various types of life insurance available in the market:

  • Term life insurance

  • Whole life insurance

  • Universal life insurance

  • Group life insurance

  • Variable life insurance

  • Endowment life insurance

  • Child insurance plans

Research each type of life insurance available to you and invest in the one that suits your needs the best.

Benefits of Life Insurance

There is no denying the many benefits of having a life insurance policy. A life insurance policy is multi-faceted and serves as more than just a financial safety net. What are those? Check out:

  • Financial security

Life is unpredictable and you don’t know what it brings. Investing in life insurance early on protects you against any mishappening and can give your loved ones a safety blanket to face difficult times. 

  • Long-term savings

Life insurance can help in wealth generation over a long period of time that can allow you to achieve long-term goals like a retirement fund, new home, marriage fund or investing in your child’s education.

  • Investment options

There are types of life insurance that allow you to invest a part of your premium for future goals. You can get multiple benefits from a single life insurance policy and can build your future simultaneously.

  • Tax benefits

Under section 80C of the Income Tax Act, 1961, one can avail of tax benefits on your insurance premiums. As per the law, an insurance premium is tax deductible, and in some cases up to ₹1.5 Lakh. 

Life insurance policies are versatile and can aid you in achieving long-term financial goals if planned correctly. Identify your reasons for purchasing life insurance, figure out which type of life insurance works for you and then calculate the coverage you need.

Team Finpage

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