Life Insurance Policy
Life insurance policy provides a payout to beneficiaries in the event of the policyholder’s death. It serves as a risk management tool, offering financial protection and support to the insured person’s dependents or chosen beneficiaries. Policyholder has an option to pay monthly/quarterly/annually/one time premium for availing the life cover.
The primary coverage that provides a lump sum payment to beneficiaries upon the death of the insured.
Add-On
Accidental Death Benefit - Offers an additional payout if the insured's death results from an accident.
Critical Illness Rider - Provides a lump sum payment if the insured is diagnosed with a specified critical illness.
Waiver of Premium - Waives premium payments if the insured becomes disabled and unable to work.
Terminal Illness - Allows the policyholder to access a portion of the death benefit if diagnosed with a terminal illness.
Exclusion / Cancellation
1. Suicide within 1 year after policy inception may result in a denied death benefit.
2. Engaging in high-risk activities, such as extreme sports, may lead to coverage exclusions or limitations.
3. Some insurance companies may exclude coverage for death resulting from war or acts of terrorism.
4. If premiums are not paid, the policy may lapse, leading to loss of coverage.
Types of Life Insurance Policy
Term life
Term life insurance offers coverage for a specified term such as 10, 15, 20, or 30 years. If the policyholder passes away during the term, the death benefit is paid out to the beneficiaries. The death benefit is usually a tax-free lump sum paid to the beneficiaries.
Group Term Life
Group term life insurance provides coverage for a group of people, typically employees of a company or members of an organization, under a single master contract. It is often offered as an employee benefit by employers to their workforce. This coverage usually ends on an employee leaving the organization or the proposer terminating the policy.
Endowment Plan
An endowment plan combines elements of insurance and investment. It provides a death benefit to the beneficiaries in case of the policyholder's death during the policy term. However, if the policyholder survives the term, the plan matures, and a lump sum maturity amount along with bonus is paid to the policyholder.
Unit Linked Insurance Plan (ULIP)
A Unit Linked Insurance Plan (ULIP) combines insurance coverage with investment options. In ULIP a portion of the premium is used as a risk premium and the balance premium is invested in market linked securities. ULIPs provide an opportunity for the insured to choose to invest in debt, equity and a combination of these two at different proportions. The investment in the market linked securities provides a higher return for the investment and thereby allowing the insured to earn more returns but with more risk involved with it.
Annuity Plan
An annuity plan provides a series of regular payments to the policy holder in exchange for a lump sum premium. Annuities are often used as a retirement income strategy to ensure a steady stream of income during one's retirement years. The income from annuity is taxable.
Guaranteed Income Plan
Guaranteed Income Plans combines insurance and investment products that offer a guaranteed return after a certain period of time. The policyholder receives the maturity proceeds as a lump sum amount or a series of per-detemined payments over a period of time, or a combination of both periodic payouts and a lump sum payout at the end of the period.