Life Insurance refers to a policy or cover whereby the policyholder can ensure financial freedom for his/her family members after death. Suppose you are the sole earning member in your family, supporting your spouse and children.

In such an event, your death would financially devastate the whole family. Life insurance policies ensure that such a thing does not happen by providing financial assistance to your family in the event of your passing.

Types of Life Insurance Policies

There are primarily seven different types of insurance policies when it comes to life insurance. These are:

• Term Plan-The death benefit from a term plan is only available for a specified period, for instance, 40 years from the date of policy purchase.  
• Endowment Plan - Endowment plans are life insurance policies where a portion of your premiums go toward the death benefit, while the remaining is invested by the insurance provider. Maturity benefits, death benefit and periodic bonuses are some types of assistance from endowment policies.
• Unit Linked Insurance Plans or ULIPs - Similar to endowment plans, a part of your insurance premiums go toward mutual fund investments, while the remaining goes toward the death benefit.  
• Whole Life Insurance - As the name suggests, such policies offer life cover for the whole life of an individual, instead of a specified term. Some insurers may restrict the whole life insurance tenure to 100 years.  
• Child’s Plan - Investment cum insurance policy, which provides financial aid for your children throughout their lives. The death benefit is available as a lump-sum payment after the death of parents.
• Money-Back - Such policies pay a certain percentage of the plan’s sum assured after regular intervals. This is known as survival benefit.
• Retirement Plan - Also known as pension plans, these policies are a fusion of investment and insurance. A portion of the premiums goes toward creating a retirement corpus for the policyholder. This is available as a lump-sum or monthly payment after the policyholder retires.

Benefits of Life Insurance

If you possess a life insurance plan, you can enjoy the following advantages from the policy.

• Tax Benefits - If you pay life insurance premiums, you are eligible for tax benefits in India, under Section 80(C) and 10(10D) of the Income Tax Act. Thus, you can save a substantial sum of money as taxes by opting for a life insurance plan.  
• Encourages Saving Habit - Since you need to pay policy premiums, buying such an insurance policy promotes the habit of saving money. 
• Secures Family’s Financial Future - The policy ensures your family’s financial independence is maintained even after your demise.
• Helps Plan Your Retirement - Certain life insurance policies also act as investment options. For instance, pension plans offer a lump-sum payout as soon as you retire, helping you to fund your retirement.

Now that you know all about life insurance policies read on to understand the various facets of other general insurance policies.

Following are some of the examples that demonstrate the importance of insurance:

• Case 1:
  Ram, a software engineer living in Bangalore meets with an accident and dies on the spot leaving his wife and son in deep emotional shock. He was just 40! He also has a home loan of INR. 30 lakhs running. Luckily, Ram has taken a term insurance cover of INR. 1 Cr. at the age of 32 years for 25 years of the policy tenure. His wife received compensation from the insurance company within 10 days which helped 
• Case 2:
  Sunil, an employee in a multinational company in Mumbai suddenly fell unconscious due to high fever. He was then rushed to the nearest hospital. He was admitted for 3 days in the hospital for diagnosis and treatment. When he was discharged after 3 days, his hospital bill came up to around INR. 70,000. Luckily, he had taken a health insurance coverage for INR. 3, 00,000. As the hospital was listed in the network hospitals of his insurer, bills were directly settled to the hospital. If he had not known the importance of insurance, he would have to pay INR.70, 000 out of his pocket. Insurance helps you to have financial stability during unforeseen events.

To conclude, shield your life and important assets against all the uncertainties with the help of insurance. Know what insurance coverages you need, compare and invest wisely. It’s important to understand that the need for insurance is to secure what you love.