One of the most important financial decisions that you will have to make is what type of life insurance policy to purchase. There are several types of policies available, customized to accommodate different needs.
However, not all types of life insurance policies are the same, and some features might be unfamiliar to you. To ensure that you have the best possible protection for yourself and your family, you must make sure that you know these policies inside out.
There are a ton of excellent features that can make life insurance a better deal for you and your family. We will discuss each feature along with the ways it benefits you as a policyholder and ensures the financial safety of your family.
- Personalized Tenure
Life insurance plans have a finite duration. You must work with an agent, who will guide you according to the kind of plan your family needs. The policy’s cover period is known as tenure, and it’s most often determined by the sum insured and any additional riders that you may choose to add.
This tenure can be customized so that you are provided with sufficient coverage. To give you an idea of how long the benefits will last, say you need life insurance to save for your child’s education through college in a reputed university.
You could choose a tenure of 20 years or more if you want the benefits to last for that long. The same goes for whole life insurance. These policies ensure that the beneficiaries get lifelong protection and care in case something bad happens to them during their lifetime.
- Death and Maturity Proceeds
Another one of the primary benefits of life insurance policies is that there are two options under which pay-outs can be made. In some instances, they will only be paid out upon either the death of the policyholder or upon the maturity date, whichever comes first.
For a pure term life insurance policy, pay-out events are typically triggered when the insured perishes. When the beneficiary receives a payment that is due to them upon the death of the policyholder who took out a life insurance policy, then it is known as a death benefit.
In a similar vein, when an investor receives payment for their investment from a life insurance plan on its maturity date, these funds are known as maturity benefits.
- Flexibility in Payments
It’s important to know that to enjoy a life cover, you have to pay premiums to the insurance service provider. Any investment decision must be made by assessing some factors such as whether it would be better to take out a whole of life or level payment plan.
You should then also think carefully about how frequently you want your instalments paid, as you can select monthly, quarterly, or annually, etc – whatever works best for you and your circumstances.
Insurers will let you choose to pay life insurance premiums in both lump sum and periodic payments such as monthly, quarterly, half-yearly, or annually for example. Both options have their pros and cons. If you do choose the lump sum method, you could however also pay it annually by making a single premium payment in one go but some things are always good to keep in mind when it comes to your health. For example, if the reason for choosing lump sum intervals is simply because it’s easy to manage for you financially.
However, this would expose you each time your annual review comes up, which may not be a very smart thing to do if at the same time your health isn’t very stable or consistent. You may need someone who can remind you of all these important factors before deciding upon what might be an ideal option for you in your present state of affairs.
- Tax Saving Benefits
Purchasing term insurance is a great way to save money on taxes. You can claim a maximum tax deduction of Rs. 1.5 lakh under section 80C of the Income Tax Act of India as per the new tax slab structure.
Under this investment option, any premiums paid for your life insurance policy represent eligible tax deductions that may be claimed on both the principal and interest, thus reducing your overall taxable income.
Additionally, Section 10(10D) under the IT Act of 1956 states that all pay-outs on your insurance policy are completely tax-free (provided your premium does not exceed 10% of your sum assured, annually).
Moreover, during this time you may also be eligible for tax deductions under 80D for premiums outside of health-related riders.
- Protection Against Liabilities
You may need to earn some cash to help you reach those lofty career goals. You can do this by reaching out to other sources of funding, but borrowing money is often one of the easiest and fastest paths.
While it is not a pleasant or easy subject to talk about, your family and loved ones can strongly benefit from having a life insurance policy. While you may be able to pay off some of your loans now, if you are unfortunate enough to die, then your family could have trouble with the bills once their primary source of income stops, especially if you have any mortgages.
By investing in a life insurance policy that guarantees future payments for mortgages and debts that your family will face upon your death, you can help them avoid the financial problems stemming from these debts.
Final Words
Life insurance comes with some additional features that many people are unfamiliar with. They often wonder what they can do with them, and how exactly they work. The purpose of this article was to answer that question, by discussing the additional features of life insurance, along with their uses. Hopefully, readers now understand these features a bit better, and how to use them to their advantage.