“Life is what happens to us while we are making other plans.”
― Allen Saunders
The aforementioned quote rings true since time immemorial, since man proposes and God disposes. Life takes unpredictable turns while we are busy planning something else, and which brings us to life insurance.
Life insurance is one effective way to tackle that unpredictable curveball that life may throw at us. Read on this article to know as to why it is important to have a life insurance.
What is Life Insurance?
It can be defined as a contract or a policy wherein an insurance company agrees to provide financial coverage to an individual in exchange of a sum of money known as premium. The insurance company will provide a lump sum amount of money to the beneficiaries or nominees of a policyholder if he dies during the term of the policy and provided the policy is still in force. The minimum amount paid by the company to you is called sum assured, which is the amount the policy was bought for. Besides the death benefit, a life insurance policy also offers maturity benefits in case the policyholder survives the policy term.
The sum assured and the tenure of the policy will be chosen by the policyholder, whereas the premium amount will be decided by the insurance company.
The Need for Life Insurance
Who wouldn’t’ want to provide a financial stability to their family? Insurance makes for an integral part of your financial planning since it helps to take care of the policyholder’s family when he is no longer around to feed, take care of and clothe them. Life insurance prepares you for the day that hardship hits you, so you don’t add to your already existing troubles another mound of debts and similar burdens.
Life insurance doesn’t only provide a financial cover to the family, but also helps in repaying any debts the policyholder might have taken during his life time. It can also be used to pay off any impending mortgages and loans and can help pay medical bills as well during any unfortunate accident caused to the policyholder. Life insurance is also an effective tax-saving instrument.
Know Your Life Insurance Better
To understand life insurance better, we need to shed light on how exactly it works. There are only a few tools as effective for financial planning in the long term as Life insurance. But, in order to understand how life insurance works, you also need to understand how and when payouts can be claimed.
For life insurance to work, the insured needs to make premium payments to the insurance company during regular periods of time, and the company in exchange for the same will guarantee a lump sum payout to the beneficiaries of the insured in case of his untimely death. The periodic premium payments will add up eventually and provides bonuses to the insured as well.
The benefits obtained out of a life insurance policy is paid out to the nominee or beneficiary upon the death of the policyholder. To receive the impending sum assured, the nominee will need to file a death claim with the concerned insurance company, for which a copy of the policyholder’s death certificate will be required, in addition to other documents. Generally, most insurance providers take 15 days to review a claim before either paying the claim or denying it. It usually takes 30 days for an insurance company to settle the claim with a nominee or beneficiary of a policyholder. Usually, most insurance companies try to settle claim early on to help avoid high interest fees for delay in claims payment.
Post the demise of the policyholder, it is important to contact the insurance company as soon as possible to begin the claim process. To receive claims, a certified copy of the policyholder’s death certificate must be obtained and submitted to the insurance company along with the original policy document.
For quite a while, a large number of insurance companies have designed and made available policies that allow their policyholders to withdraw money against the policy’s face value. In the case of critical or terminal illness, one may avail a loan or withdraw money against your insurance by submitting the required documents to the insurance company accompanied by a letter that states the reason for the withdrawal.
Uses Of Having Life Insurance
There are several uses of having life insurance. They are as follows:
- Life Risk cover: A life risk cover will help your family on that rainy day when you don’t foresee trouble coming your way. A financial payout will allow your family to sustain a quality lifestyle even when you are no longer around to take care of them.
- Comprehensive Plan: A life insurance cover, besides providing a financial support to the family also serves as a long-term investment key. It allows one to plan accordingly with well-defined objectives viz marriage, higher education, house construction, retirement etc. You can maturity benefits in most plans and a number of product options viz; Guaranteed Maturity Values, Guaranteed Cash Values etc.
- Cover against hospitalization charges: All life insurance companies provide a financial cover against hospitalisation expenses and critical illness.
- Encourages Savings: Through contributing a periodic premium towards the life insurance policy from time to time, you end up saving money for a relatively longer period of time and this money will help you in different stages of life.
- Pension/Annuities: You will be able to avail annuities/pension when you save money for a longer period of time, which will be instrumental in serving as a regular source of income post your retirement.
- Tax Benefits: You are eligible for tax benefits as well after you save a significant amount of money, which would otherwise be reduced from your standing income as taxes.
Needless to say, it is important to have life insurance for your own financial goodwill and to accelerate your long term investment planning. Also, did you know that you could buy life insurance online as well? Just log on to Coverfox.com and find myriad life insurance policies at your disposal, and the customer support will help you find that perfect life insurance policy made for you.