Your life insurance policy is meant to safeguard against the uncertainties and eventualities of life. It enables you to live your life care-free with the assurance that your family will be provided for, financially, in the unfortunate event that something happens to you. A life insurance policy is a contract between you and the insurer where you make regular payments called premiums in exchange for life cover for your beneficiaries in case of demise.
A term insurance plan is life insurance that is purchased for a fixed period. Such policies are pure protection plans that generally come with only death benefits that are paid to your beneficiaries on the occurrence of the event, that is the unfortunate eventuality of your death. This is also why term insurance policies are the cheapest with a very basic premium amount for a large life cover.
On the other end of the spectrum are whole life insurance policies that extend up to the whole life of the insured. A whole life insurance plan will also provide survival benefits to you. Many whole life insurance plans come with the feature of a loan facility. Under these, the policyholder has the option to borrow sum against the policy.
Life insurance is, after all, a vehicle to ensure financial protection for your loved ones in your absence. Think of it as driving your vehicle - know when to steer in different directions, the speed you need to keep and reach your financial goals. Here are some ways you can have greater control over your life insurance policy:
- Start Early
The first and foremost governing factor in any life insurance scheme is the age at which you buy it. The earlier you buy it, the cheaper is the premium to be paid.
- Be honest with the information
At the time of filling the form or furnishing requisite information, it may be tempting to make it look better on paper than the actual realty. Sometimes people try to hide information, distort it or ignore pieces of information altogether. Remember that all your personal credentials and medical history must be accurately presented to the insurance company. Misleading information or omission can have serious repercussions when trying to make claims later.
- Tax-sheltered investment into life insurance plans
What makes life insurance a prudent investment tool are the tax benefits and flexibility built into the plan. The tax benefits include the deduction allowed on the premiums paid towards life insurance under Section 80C, while contributions made towards your pension plan are deductible under section 80CCC. Further, the maturity and death benefit proceeds are also tax-free in the hands of the receiver. All of these are subject to certain limits according to the Income Tax Act. Another important feature is flexibility. You can decide the terms of your life insurance. This begins with the sum assured. How much do you want the life cover to be? You get to decide that and accordingly you pay the premium. The frequency to pay the premiums (monthly, quarterly or annually) also depends on what you opt for. Then there is the option to choose from single life and joint life term plans. In joint term plans, the insured (i.e. you) and your spouse are covered and in case of death of either, the death sum assured for the deceased will be paid to the surviving member. In case of the sudden death of the couple, the entire amount assured will be paid to the beneficiary mentioned.
Therefore, in order to drive your life in your way, you should know what you want to reach financial goal.