What Are The Features of Life Insurance?

Life insurance is an important aspect of financial planning that provides financial security to individuals and their families. A life insurance policy offers various features that are designed to cater to the different needs and objectives of policyholders. This article will discuss the features of life insurance policies in India.

Many people often wonder “what are the characteristics of life insurance?”. Life insurance policies come with a range of features that are designed to cater to the different needs and objectives of policyholders:

The following are some of the main features of top life insurance policies:

• Life Coverage
  The primary feature of a life insurance policy is life coverage. This feature provides financial protection to the policyholder's family in case of their untimely demise. The insurer pays a lump sum amount to the nominee in case of the policyholder's death during the policy term. The life coverage amount is determined by the premium paid and the policy's sum assured.


• Maturity Benefit
  A maturity benefit is a feature that provides a lump sum amount to the policyholder on the policy's maturity. This amount is paid if the policyholder survives the policy term. The maturity benefit is usually equal to the sum assured or a percentage of the premium paid. This feature helps policyholders plan their long-term financial goals and objectives.


• Savings and Investment Benefits
  Many life insurance policies offer savings and investment benefits. These policies provide a combination of life coverage and investment benefits that can help policyholders build their savings and grow their wealth. These policies usually have a long-term investment horizon and invest in various market-linked instruments such as equities, debt, and others.


• Riders
  Riders are additional benefits that can be added to the base policy. They provide extra coverage and benefits such as accidental death benefits, critical illness coverage, and others. Riders can be added to the policy by paying an additional premium. The availability of riders varies depending on the insurer and the policy.


• Surrender Value
  Surrender value is a feature that allows policyholders to surrender their policy before the maturity period and receive a lump sum amount. The surrender value is determined by the premium paid and the policy's surrender value factor. The surrender value is usually lower than the total premium paid and depends on the policy's age, duration, and other factors.


• Tax Benefits^*
  Life insurance policies offer tax benefits^* under Section 80C and Section 10(10D)^** of the Income Tax Act, of 1961’’. The premium paid towards the policy is eligible for tax deductions, and the proceeds from the policy are tax-free. This feature helps policyholders save on taxes and increases their overall savings.


• Grace Period
  A grace period is a feature that allows policyholders to pay their premium after the due date without any penalty. The grace period varies depending on the insurer and the policy and can range from 15 days to 30 days. Policyholders must pay their premium during the grace period to keep their policy in force.


• Policy Loan
  A policy loan is a feature that allows policyholders to avail of a loan against their policy's surrender value. The loan amount is usually a percentage of the policy's surrender value, and the interest rate charged is lower than in other types of loans. The policy loan is repayable with interest, and failure to repay the loan can lead to a reduction in the policy's surrender value.
  
  In summary, life insurance policies offer various features and benefits that cater to the different needs and objectives of policyholders. It is essential to understand these features and choose a policy that suits your needs and objectives. Hence, it is important to compare different policies and insurers before making a decision.

Here’s why it is important to buy a life insurance policy –

• Financial Protection For Your Family
  Life is unpredictable, and hence, you should prepare for the worst, especially if you are the sole breadwinner. Even if you have savings, they may not be enough to cover your family's expenses for life, if something happens to you unexpectedly. A life insurance policy ensures your financial responsibilities are met and provides your nominees with a sum of money if you are no longer around.


• Income Replacement
  If you have a family that relies on your income, life insurance can bridge the gap of income replacement when you are no longer there to provide for them. Your family would still need to cover expenses like housing, food, utilities, education, etc., even without your income. Life insurance can provide a death benefit to help replace the lost income and support your family financially.


• Debt Settlement
  Life insurance can help your loved ones pay off debts if something happens to you. If you have loans or mortgages, your family may struggle to repay them without your income. Life insurance can ease this burden and provide a financial safety cushion for your loved ones during a difficult time.


• Achieving Financial Goals
  Permanent life insurance policies like money-back plans, endowment plans, ULIPs, etc., offer savings and investment components that can help you achieve both short and long-term financial goals. Whether it's funding your children's education, buying a home, or planning for retirement, life insurance can provide a means to save and secure your family's financial future.


• Wealth Generation
  Certain life insurance options come with investment features that allow you to build wealth for retirement or other life goals. With products like ULIPs, you can invest according to your risk tolerance and secure your family's future while also growing your wealth.


• Leaving A Legacy
  Life insurance plans like the Whole Life Insurance Plan allow you to leave behind a financial legacy for your loved ones. The death benefit can be used to support your family's needs or set up funds for your children's future.


• Retirement Planning
  Retirement plans, including pension or annuity plans, can provide financial security and peace of mind during your retirement years. Life insurance plans like endowment, ULIPs, etc., can further enhance your retirement savings and help maintain financial independence in your golden years. Furthermore, with some plans, you can also include the maturity benefit in your retirement planning strategy.

In conclusion, life insurance policies offer various features and benefits that cater to the different needs and objectives of policyholders. The features of life insurance policies in India include life coverage, maturity benefits, savings and investment benefits, riders, surrender value, tax benefits^*, grace period, and policy loans. It is essential to understand these features and choose a policy that suits your needs and objectives. Hence, it is important to compare different policies and insurers before making a decision.