Life is short and we have so many responsibilities to fulfill in this short life. No matter how much we try, in order to win something we have to lose something, this is the philosophy of life. But, what will you achieve if there will be no life? An insurance policy is the best way to stay alive even after death for your loved ones. With a perfect insurance, your family can have adequate funds for future or ongoing expenses such as daycare, mortgage payments, and college even in your absence.

Life insurance is a protection insurance plan against financial loss of an individual that would result from the premature death of an insured. The named beneficiary by the policyholder receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured. The death benefit is paid by a life insurer company in consideration for premium payments made by the insured. There are three main components of the life insurance contract and they are:

• Death Benefit- The death benefit of life insurance is the amount of money the insured’s beneficiaries will receive from the insurer upon the death of the insured.
• Premium Payment- There are various factors such as the insured’s age, personal and family medical history, and lifestyle are the main risk determinants which affect the premium amount of the insurance policy.
• Cash Value – There are two components of life insurance policy, first it is a savings account that allows the insured to accumulate capital that can become a living benefit to the policyholder. Second, as the cash value accumulates, the amount the insurer is at risk for the entire death benefit decreases, which is how it is able to charge a fixed level premium.

Life-based insurance contracts tend to fall into two major categories:

Protection policies – Designed to provide a benefit, typically a lump sum payment, in the event of a specified occurrence. A common form of a protection policy design is term insurance.

Investment policies – The main objective of these policies is to facilitate the growth of capital by regular or single premiums. Common forms of the Whole life, Universal life, and Variable life policies.

Categories of Life Insurance Policy

Under the Life Insurance policy contract in India, the insurer assures to pay a definite amount of money to the policyholder’s family on his untimely demise during the policy term as per the insurance policy terms and conditions. There are six categories in which life insurance policies are categorized widely on the general basis:

• Term Insurance Plan- Term plans in India does not have a cash value attached to them, and thus only provide a death benefit. Pension plan, also known as Annuity plan and Retirement plan, provide financial security to policyholders after their retirement, by way of regular annuity payments.
• Unit Linked Insurance Policies (ULIPs): Unit Linked Insurance Plans or ULIPs provide a risk cover against death to the policyholder and also allow policyholders to invest in certain funds and avail the returns.
• Endowment Policies: An Endowment Plan is ideal for policy buyers who are looking for a protection cum savings option. It pays a lump sum amount for the specified duration or on the death of the policyholder, whichever is earlier.
• Whole Life Policies: Whole life policies provide a life cover for the policyholder’s entire lifetime. They charge a level premium for the entire policy tenure. These policies offer a range of benefits to the policyholder and also accumulate a cash value over a period of time.
• Money Back Plans: Money-back policies can be purchased by individuals looking for liquidity in order to attain key milestones of their life.
• Pension Plans – Pension plan, also known as Annuity plan and Retirement plan, provide financial security to policyholders after their retirement, by way of regular annuity payments.

Life insurance is very important in the stressed up life in which we all live. We never know which disease is dwelling in our body or what unfortunate event is waiting for us. We get to know about the untimely end of many people, leaving everything behind, messed up, without any proper planning, but with proper life insurance policy, you will have a peace of mind. Nothing is as satisfactory to know that your loved ones will be safe even after your absence. We live our present life to the fullest if we know that our future is secure with a Life Insurance Policy.

Hence, you should get the best life insurance policy for you keeping in mind your financial status for the insurance plan, cover amount as per the requirements and needs of your loved ones and avail for a plan only after understanding the terms and conditions of the Life Insurance Plan.