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What is Life Insurance?
Life Insurance is a financial cover for a contingency linked with human life, like death, disability, accident, retirement etc. Human life is subject to risks of death and disability due to natural and accidental causes. When human life is lost or a person is disabled permanently or temporarily, there is loss of income to the household.
Though human life cannot be valued, a monetary sum could be determined based on the loss of income in future years. Hence, in life insurance, the Sum Assured (or the amount guaranteed to be paid in the event of a loss) is by way of a ‘benefit’. Life Insurance products provide a definite amount of money in case the life insured dies during the term of the policy or becomes disabled on account of an accident.
Why Life Insurance is required?
Let’s proceed on the assumption that you’re taking out an individual construction loan. Such loans, which can be tough to get without a previous banking history because of the lack of collateral (a finished home),
- To ensure that your immediate family has some financial support in the event of your demise
- To finance your children’s education and other needs
- To have a savings plan for the future so that you have a constant source of income after retirement
- To ensure that you have extra income when your earnings are reduced due to serious illness or accident
- To provide for other financial contingencies and life style requirements
As an Investment
Apart from risk cover life insurance also offers the benefit of regular savings. Whole life plans, Unit Linked Insurance Plans (ULIP), endowment or money-back policies etc offer a mix of life cover and savings. In a whole life plan the policy holder is covered till death or on reaching 100 years of age. If the insured individual lives beyond the age of 100, he/she receives a maturity benefit and in the case of any unfortunate event, his/her nominees receive the death benefit. A whole life insurance policy also accumulates a cash value that’s accumulated throughout the life of the policy.
Providing Financial Security
Life insurance provides you with that unique sense of security that no other form of investment provides. By buying life insurance, you buy peace of mind and are prepared to face any financial demand that would hit the family in case of an untimely demise. It can also help your family to enjoy their current lifestyle in your absence without compromising on their dreams.