A life insurance policy is one of the best financial instruments to guarantee the financial stability and freedom of your family during and after your time on earth. A life insurance policy has become a necessity for everyone in today’s society. Insurance companies have realised the needs of customers and created a variety of insurance plans that help people choose the right one according to their needs.
However, the sheer number of insurance companies and the number of policies they have are a lot, and you need to be careful and informed when choosing your life insurance policy. A life insurance policy is a long-term investment plan that can have a significant impact on the financial stability of your future and your ability to meet your life goals.
So, you need to know how a life insurance policy works, its features, and some of the eligibility criteria that you need to meet for buying an insurance policy before you go off to purchase yours.
How Does Life Insurance Policy Work?
A life insurance policy is a tool that can protect your financial interests during the term of the policy. In case of your untimely death for any reason, the life insurance policy is redeemable by your chosen nominee(s), and the total sum assured of your life insurance policy is paid to them. In the best-case scenario, you are alive and well to see the end of your insurance term; you will get the entire sum assured promised plus the maturity bonus paid to you. How does it work? It’s a simple process.
- You invest a set amount of money called premiums at regular intervals for a set amount of time.
- After your selected payment period is over, the insurance company takes over and continues to add to the capital you have accumulated.
- After the term of the policy is over, you get the entire amount you have accumulated back, plus the interest you have earned on your capital throughout the term of your insurance.
- You are also paid a maturity bonus if you withdraw the policy after the entire term is over. In case, the policy is lapsed due to the death of the policyholder, the policy and the nominee will not be eligible for receiving maturity benefits.
- In case of your death during the term of the insurance, your chosen nominee is set to get death benefits, which is the entire sum assured of the insurance policy.
What Are The Features of Life Insurance?
A life insurance policy comes with many features that make it a very popular and safe investment choice among major sections of society. These features have been specifically created to help people get the most benefits out of a life insurance policy. Let’s look at some of the features of some of the best life insurance policy in India.
- Tax Savings
If you are looking for tax-saving tips for salaried persons, one of the best tips is to invest in a life insurance policy. The best life insurance policy in India offers dual tax benefits on the premium paid for the insurance policy with a maximum tax exemption of Rs. 1.5 lakh per year. You also receive tax exemption benefits on the maturity benefits of your policy according to section 80(C) and section 10(10D) of the income tax act.
- Wealth Generation
Life insurance policies can be a fantastic way for you to generate wealth. There are insurance plans specifically created for the purpose of wealth creation along with life insurance coverage. You can buy these plans to automate your savings, and with the help of these tools, you will be able to gain maximum returns and create wealth to fulfil your long-term life goals.
- Loan Benefits
An active life insurance policy can be used as collateral for sanctioning loans. You can also use an active insurance policy to repay your existing loans. This feature helps you stay away from the stress of financial burden and have the option to give up your insurance rather than having to surrender your hard-earned assets for the repayment or sanction of a loan.
Eligibility Criteria For Life Insurance
The eligibility terms for the different types of life insurance vary. The eligibility criteria of the same life insurance among different insurance providers also vary, but in general, there are few guidelines that are followed overall for life insurances. They are:
- The policyholder needs to be a citizen of India.
- Depending on the type of policy they are trying to purchase, the policyholder may need to provide supporting documents to prove they can adequately bear the charges of the policy they are trying to purchase.
- In general, the policyholder is required to go through a medical test before the policy is activated to learn about the health problems and existing conditions of a policyholder. This will determine the premium amount the policyholder will be required to pay and the type of coverage they will need to adequately cover their needs.
