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LIFE
INSURANCE
Life Insurance, India
Life is very fragile and death is a certainty. We cannot
control the uncertainties of life. But, we can cover the
risks surrounding us. Life insurance, simply put, is the
cover for the risks that we run during our lives. It
protects us from the contingencies that could affect us.
Life insurance is not for the person who passes away, it
for those who survive. It is the responsibility of every
bread earner to guard against the events that could
affect the family in the unfortunate circumstance of his
/ her demise. Thus, having a life insurance policy is
very vital. Before going for a life insurance policy it
is imperative that you know about various types of life
insurance policies. Major among them are:
Endowment Policy
Whole Life Policy
Term Life Policy
Money-back Policy
Joint Life Policy
Group Insurance Policy
Loan Cover Term Assurance Policy
Pension Plan or Annuities
Unit Linked Insurance Plan
Life Insurance
A protection against the loss of income that would
result if the insured passed away. The named beneficiary
receives the proceeds and is thereby safeguarded from
the financial impact of the death of the insured.
Investopedia Says: The goal of life insurance is to
provide a measure of financial security for your family
after you die. So, before purchasing a life insurance
policy, you should consider your financial situation and
the standard of living you want to maintain for your
dependents or survivors. For example, who will be
responsible for your funeral costs and final medical
bills? Would your family have to relocate? Will there be
adequate funds for future or ongoing expenses such as
daycare, mortgage payments and college? It is prudent to
re-evaluate your life insurance policies annually or
when you experience a major life event like marriage,
divorce, the birth or adoption of a child, or purchase
of a major item such as a house or business.
Life Insurance
In general, life insurance is a type of coverage that
pays benefits upon a person's death or disability. In
exchange for relatively small premiums paid in the
present, the policy holder receives the assurance that a
larger amount of money will be available in the future
to help his or her beneficiaries pay debts and funeral
expenses. Some forms of life insurance can also be used
as a tax-deferred investment to provide funds during a
person's lifetime for retirement or everyday living
expenses.
A small business might provide life insurance to its
workers as a tax-deductible employee benefit—like health
insurance and retirement programs—in order to compete
with larger companies in attracting and retaining
qualified employees. In addition, there are a number of
specialized life insurance plans that allow small
business owners to reduce the impact of estate taxes on
their heirs and protect their businesses against the
loss of a key employee, partner, or stockholder. Group
life insurance is generally inexpensive and is often
packaged with health insurance for a small additional
fee. Companies that provide life insurance for their
employees can deduct the cost of the policies for tax
purposes, except when the company itself is named as the
beneficiary.
Life insurance is important for individuals as well,
particularly those who—like many entrepreneurs—are not
covered by a company's group plan. Experts recommend
that every adult purchase a minimum amount of life
insurance, at least enough to cover their debts and
burial expenses so that these costs do not fall upon
their family members. The insurance industry uses a
standard of five times annual income in estimating how
much coverage an individual should purchase. In her book
Health Insurance: A Guide for Artists, Consultants,
Entrepreneurs, and Other Self-Employed, Lenore Janecek
claims that entrepreneurs should determine the minimum
amount of coverage they need by calculating how much
they spend annually and how much debt they have, then
adding the cost of funeral arrangements and, if
applicable, college tuition for children.
The cost of life insurance policies depends upon the
type of policy, the age and gender of the applicant, and
the presence or absence of dangerous life-style habits.
Insurance company actuaries use these statistics to
determine an individual's mortality rate, or estimated
number of years that person can be expected to live.
Policies for women usually cost less than those for men,
because women tend to live longer on average. This means
that the insurance company will receive premiums and
earn interest on them longer before it has to make a
payment. Experts recommend that companies or individuals
seeking life insurance coverage choose an insurance
agent with a rating of A or better, and compare the
costs of various options before settling on a policy.
Types of Life Insurance Policies
TERM INSURANCE. Term life insurance is the simplest and
least expensive type, as it pays benefits only upon the
policy holder's death. With annual renewable term
insurance, the policy holder pays a low premium at
first, which increases annually as he or she gets older.
With level term insurance, the premium amount is set for
a certain number of years, then increases at the end of
each time period. Experts recommend that people who
select term insurance make sure that their policies are
convertible, so they can switch to a cash-value plan
later if needed. They also should purchase a guaranteed
renewable policy, so that their coverage cannot be
terminated if they have health problems. Term insurance
typically works best for younger people with children
and limited funds who are not covered through an
employer. This type of policy enables such a person's
heirs to cover mortgage and college costs, estate taxes,
and funeral expenses upon his or her death.
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