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What is Life Insurance Policy?

Know more about life insurance meaning, benefits & types of life insurance in detail.

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If you are wondering what is life insurance meaning, you should know that a life insurance policy is a contract between an individual and an insurance provider, in which the insurance company gives financial protection to the policyholder in exchange for monthly fees (known as premiums).

As per the life insurance definition, the insurer (insurance company) pays a sum assured to the policyholder or to the named nominees in case the policyholder meets with an untimely demise in exchange for the premium payments made towards a life insurance policy.

Based on the arrangement, in the event of the death of the policyholder or, if the policy matures, the insurance provider shall pay the person or his family a lump sum amount after a certain amount of time. There are different types of life insurance policies to suit the individual needs and requirements of the policy buyers.

Understanding life insurance definition, its benefits and features is important before you buy one. Read on to know more about what is life insurance meaning for you. 

What Are the Benefits of Life Insurance Plans?

Once you get an understanding of what is life insurance meaning, as well as the different types of life insurance policies, you will find that there are 3 main advantages of getting the best life insurance policy that you should know about. Following are the 3 primary benefits offered by different types of life insurance policy:

1. Financial Security

Life is unpredictable and can be full of uncertainties. It is difficult to reduce the possibility of an unfortunate event like death. In such a scenario, the family faces financial constraints arising from the lack of a steady income.

Investing in the best life insurance policy early on in life acts as a safety blanket during such eventuality. According to the life insurance definition, the insurance provider is obliged to pay the nominee or beneficiary the pre-defined sum assured. As a result, even in the policyholder’s absence, his family stays protected.

Also Read: Benefits of Term Insurance Plans

types of life insurance policy in India Max Life Insurance

2. Long-Term Savings

If one wants to make long-term investments, it’s important to think about life insurance meaning. Such insurance plans help you make systematic savings and create a corpus, which can be used for several reasons, such as building a new home, financing quality schooling for your child, and funding a child’s marriage expenses.

What’s more, when you learn the life insurance definition, you will find some types of life insurance policies often offer monthly pay-outs in the form of annuities, which is an ideal way to aim at and achieve retirement goals.

3. Investment Options

Understanding the meaning of life insurance in your financial context will allow you to plan your investments efficiently as well. Life insurance providers offer Unit-Linked Investment Plans (ULIPs), which are mainly investment instruments based on the market linked returns and life insurance, meaning you can get dual benefits with a single financial product.

These market-linked life insurance products provide significant gains during maturity, therefore making them ULIPs a reliable investment tool.

4. Tax Benefits

According to the life insurance definition, you are required to pay regular premiums to keep the policy active. With life insurance plans, you also get tax benefits under prevailing laws as per Income Tax Act, 1961. The life insurance premium paid can be availed as a tax deduction under Section 80C of the Income Tax Act, 1961. You can avail of deduction up to Rs.1.5 lakh under Section 80C.

Read More: Tax Benefits of Life Insurance Plans in India

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What are the Different Types of Life Insurance?

Now that you are aware of what is life insurance meaning and life insurance definition, you should check the main types of life insurance plans:

  • Term Life Insurance Plans – Pure risk covers
  • Unit linked insurance plan (ULIP) – Insurance as well as Investment opportunities
  • Endowment Plan – Insurance and Savings
  • Money-Back – Periodic returns alongside insurance cover
  • Whole Life Insurance – Whole life coverage to the life assured
  • Child's Plan – For achieving your child's life goals like education and marriage
  • Retirement Plan – Post-retirement income

Let’s learn further and understand the specifics of different types of life insurance policies.

1. Term Life Insurance Plans

Term life insurance plans are the purest form of life insurance types as they offer life cover with no savings or profit elements. Term life insurance plans are the most affordable types of life insurance policies as premiums are relatively cheaper in comparison to other life insurance plans. 

Also Read: What is Term Insurance?  

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2. Unit linked insurance plan (ULIP)

One of the most unique life insurance types, a unit-linked insurance plan, is a thorough mixture of investment (market-linked returns) and insurance. As per the life insurance definition, the premium paid for the ULIP plan is partially used as a risk (insurance) cover and partially invested in different funds.

Depending on the policyholder’s risk tolerance, they can invest in different funds offered by the insurance provider. Then the insurance provider invests the collected amount into different money-market instruments such as shares and equities.

3. Endowment Plan

The endowment plan is a traditional types of life insurance policy that is a blend of insurance and savings.

With life insurance types such as an endowment plan, if the life assured live longer than the policy period, the insurance company provides maturity benefit to the policyholder. Additionally, some endowment plans may offer periodic bonuses that are either paid on maturity or to the beneficiary in case of the policyholder’s untimely death.

What is Life insurance Max Life Insurance

3. Endowment Plan

The endowment plan is a traditional types of life insurance policy that is a blend of insurance and savings.

With life insurance types such as an endowment plan, if the life assured live longer than the policy period, the insurance company provides maturity benefit to the policyholder. Additionally, some endowment plans may offer periodic bonuses that are either paid on maturity or to the beneficiary in case of the policyholder’s untimely death.

What is Life insurance Max Life Insurance

4. Money-Back

Money-back life insurance plans are a unique types of life insurance policy in which a portion of the sum assured is paid back directly to the insured at regular intervals as a survival benefit. This way, the policyholder can achieve short-term financial objectives.

5. Whole Life Insurance

Whole life insurance plans are amongst the life insurance types that cover the life insured for a lifetime, or in a few cases, up to the age of 100 years.

At the time of purchasing a whole life insurance policy, the sum assured gets determined. During the purchase, a nominee is mentioned. In case of any unfortunate event, as per the whole life insurance definition, they get paid with the death claim and any bonuses, if applicable.

Nevertheless, if the life assured lives longer than 100 years, the insurance provider gives the life insured with a maturity benefit equal to the endowment corpus.

6. Child Plan

Child life insurance plans aim at building a corpus for the future development of a child. Typically, such life insurance types helps in funding the education and marriage of a child.

Such plans provide instalments annually or in one lump sum pay-out, following the major milestones of a child’s life. In case the insured parent meets with an untimely death during the policy term – future premiums are waived off, and the policy benefits continue without disruption.

7. Retirement Plan

Retirement life insurance plans support building a stable financial source for an individual’s retirement years. The purpose and meaning of life insurance for retirement is to help one become financially independent and live without any worry.

Most retirement life insurance definitions fall under life insurance types that offer annual pay-out (by means of annuities) or a one-time lump sum pay-out (by means of commutation of the accumulated amount, up to the prescribed limits) on the completion of 60 years of age.

In case of an eventuality, within the policy term, the insurer pays the insurance benefit to your family.

How to Buy Life Insurance Online?

Now that you know what is life insurance meaning, you can proceed to buy life insurance online by following a simple and easy process. You can buy a life insurance plan online from Max Life Insurance following the below mentioned steps:

Step 1: Log on to www.maxlifeinsurance.com and click on “Calculate Premium”.

Step 2: Enter your personal information like Name, Mobile number, Gender, Smoker/Non-Smoker, Date of Birth, Annual Income. Click on “Calculate Now”.

Step 3: Enter Life Cover amount, premium payment term and click on “Proceed”.

Step 4: Select Riders and click on “Proceed”.

Step 5: Enter all the essential information required and click on “Proceed”.

Step 6: Select your Payment method and click on “Pay”.

What is Term Life insurance Max Life Insurance

How to Buy Life Insurance Online?

Now that you know what is life insurance meaning, you can proceed to buy life insurance online by following a simple and easy process. You can buy a life insurance plan online from Max Life Insurance following the below mentioned steps:

Step 1: Log on to www.maxlifeinsurance.com and click on “Calculate Premium”.

Step 2: Enter your personal information like Name, Mobile number, Gender, Smoker/Non-Smoker, Date of Birth, Annual Income. Click on “Calculate Now”.

Step 3: Enter Life Cover amount, premium payment term and click on “Proceed”.

Step 4: Select Riders and click on “Proceed”.

Step 5: Enter all the essential information required and click on “Proceed”.

Step 6: Select your Payment method and click on “Pay”.


What is Term Life insurance Max Life Insurance

How to Choose the Best Life Insurance Policy?

When you get an understanding of what is life insurance meaning and have recognised the need for life insurance, you should be aware of these simple steps to pick the best life insurance policy. Select the best available life insurance plans with these steps:

1. Get in Touch With An Insurance Consultant/ Provider

Although this may sound insignificant, at the initial level, it is essential to involve a credible and knowledgeable insurance advisor or provider when seeking life insurance. The meaning of life insurance in your family’s future is significant, and therefore, it is a crucial decision.

Many people are unlikely to decide on their own and need an insurance advisor’s expertise. Consumers of the insurance industry are more inclined towards digital media but still expect human interaction and recommendation [2] for such critical activities.

2. Evaluate The Life Insurance Cover

A life insurance provider can help you calculate the life cover amount (sum assured). They also evaluate your source of income, the number of dependents, any liabilities and your expenditure to arrive at a preferred life cover.

Life insurance providers also help you choose the best insurance from amongst the different types of life insurance policies that are available in the market. This makes sure that you understand the meaning of life insurance for your family and receive an optimum life cover. Also, you can check your life insurance requirements with our online calculator.

3. Compare Life Insurance Plans

Learning about what is life insurance meaning, you must come across many insurance providers in the market who offer varied types of life insurance policies. One needs to make sure that they carefully choose the most suitable life insurance available. 

Before you make any decision, it is critical that you know the meaning of life insurance and also compare different types of life insurance policies to avail the best one available as per financial needs.

What is Term Life insurance Max Life Insurance

3. Compare Life Insurance Plans

Learning about what is life insurance meaning, you must come across many insurance providers in the market who offer varied types of life insurance policies. One needs to make sure that they carefully choose the most suitable life insurance available. 

Before you make any decision, it is critical that you know the meaning of life insurance and also compare different types of life insurance policies to avail the best one available as per financial needs.

What is Term Life insurance Max Life Insurance

What is Life Insurance Premium?

Hra formula

Hra formula

Now that you are aware of what is life insurance policy, it is essential for you to know some of the most basic terms related to life insurance plans. Another essential aspect that you must know about is what is life insurance premium.

Life insurance definition refers to premium as the amount that you pay to the insurance company. In return, life insurance company provides your family with financial protection in case of your untimely demise during the policy term.

How Much Life Insurance Do You Need?

Besides understanding the meaning of life insurance plans, you should also evaluate how much life insurance cover do you actually need. It is common to have questions such as what is life insurance cover, what is life insurance add ons, and know what is life insurance features.

While it is impossible to put a definitive rupee value on human life, it is still necessary for you to measure how much you are worth to get the right life insurance plans. You can measure your human life value (HLV) by assuming what it would take for your family to be financially stable in your absence.

In life insurance jargon, Human Life Value or HLV is the sum assured and the monetary estimation of the policyholder's life worth.

The basic method of calculating the human life value includes two steps:

1. Add all expenses such as household expenses and everyday life expenses

2. Calculate future obligations (such as outstanding loans)

The addition of the figures mentioned above gives an estimation of human life value that is your life insurance policy’s sum assured.

Life insurance meaning Max Life Insurance

In life insurance jargon, Human Life Value or HLV is the sum assured and the monetary estimation of the policyholder's life worth.

The basic method of calculating the human life value includes two steps:

1. Add all expenses such as household expenses and everyday life expenses

2. Calculate future obligations (such as outstanding loans)

The addition of the figures mentioned above gives an estimation of human life value that in meaning is your life insurance policy's sum assured.


Life insurance meaning Max Life Insurance

Which Financial Goals Can You Secure with Life Insurance?

Just knowing what is life insurance meaning and life insurance definition may not be enough to understand your unique requirements. Life Insurance plans help complete numerous financial objectives of an individual and his family. Some goals of an individual that the best life insurance policy helps fulfil:

  • Financial protection against loss of life
  • Education for Children
  • Child’s Marriage
  • Owning/Buying a House
  • Post Retirement Pension or regular income

These are only a handful of financial goals that you can achieve with the help of life insurance plans. Life insurance plans are pretty versatile. You can plan for your stated life goals and align your insurance to help you achieve those, e.g., you can utilise the corpus created out of an endowment plans (traditional or market-linked) to say, pay for a house at a future date.

Get Insured to Stay Secured

Purchasing a life insurance policy is a necessity in our times. While many buy in different types of life insurance policies, not all know about the many benefits, it offers. In your absence, the meaning of life insurance is to support your family in times of difficulty and gives them financial assistance. 

Moreover, investing in the life insurance policy encourages a disciplined habit of savings. Thus, it enables one to create a significant corpus.

Life insurance policies from Max Life Insurance help safeguard your financial future and lets you earn multiple other benefits. So, choose to buy life insurance policy now and stay secured!

Frequently Asked Questions (FAQs)

Q. Is it essential to buy life insurance policy?

A. If you know what is life insurance meaning, you must know that life insurance plan may not seem like necessary, but it sure is a smart choice in this uncertain time. It provides your family members with financial protection at the time of your untimely demise. Not only this, but life insurance definition also includes various other benefits, including tax exemptions on premium paid.

Q. Is there any tax benefit with Life Insurance Plans?

A. Yes. As per life insurance definition, you pay a certain amount as a premium regularly to the insurer. You can avail of tax deduction up to Rs.1.5 lakh under Section 80C of the Income Tax Act, 1961, for the life insurance premium paid. Tax benefit are subject to change as per are prevailing tax laws.

Q. What are the different types of life insurance available in India?

A. The different types of life insurance policy available in India are as follows:

  • Term Life Insurance Plans
  • Unit linked insurance plan (ULIP)
  • Endowment Plan
  • Money-Back
  • Whole Life Insurance
  • Child's Plan
  • Retirement Plan 

Q. Who is a Nominee?

A. Nominee is the family member or relative who will receive or who will be entitled to the insurance plan benefit i.e., Sum Assured after the untimely demise of the policyholder.

Q. How can you Pay for your Life Insurance?

A. You can opt for either one-time premium payment (annually) or regular premium payments which include monthly/quarterly/semi-annually. 

Q. How many nominees can I add to my policy?

As a policyholder, you have an option to nominate more than one induvial for your policy. However, on doing so, the pay-out amount gets divided evenly between the nominees, and each gets their respective share in a legal manner.

Q. Can I divide my policy amount between nominees?

Yes, when you have more than one nominee, the pay-out they receive gets equally divided amongst them. However, different types of life insurance policies have different terms and conditions, so it is better to check such things with your insurance provider to assess life insurance meaning for your loved ones.

Q. How much I have to pay per month for my life insurance?

Depending on many factors such as your chosen option of premium payment, add on riders, age, and medical conditions, the premium amount you need to pay towards your insurance differs.

Q. What is the age limit for life insurance?

Typically, most insurance plans can be bought by anyone over the age of 18, however, depending on the policy terms and conditions as well as the insurer, the maximum age limit may vary.

Q. How to claim life insurance after death of life insurance policy holder?

In case of the policyholder’s (life assured) untimely death, the nominees or assignee must immediately send a claim intimation to the insurance provider. Some mandatory documents required are:

  • Original insurance policy documents
  • Original/attested copy of death certificate issued by local municipal authority
  • Death claim application form (Form A)
  • NEFT mandate form attested by bank authorities along with a cancelled cheque or bank account passbook
  • Nominee’s photo identity proof such as a copy of Passport, PAN card, Voter identity card, Aadhar (UID) card, etc.

Q. What is the meaning of rule of thumb for life insurance policy?

Rule of thumb for life insurance policies suggests that one must invest in life insurance plans with a sum assured that is 10 to 12 times their annual income. However, the life insurance meaning can differ from person to person as every individual has uniquely distinctive financial conditions.

Q. Can I cash my life insurance policy before death?

Yes, it is possible to cash out your life insurance by leveraging cash value withdrawals, or opting for a loan against your policy, or surrendering your insurance plan.

Q. What is the meaning of paid-up value in insurance plans?

The meaning of life insurance paid-up value is a lowered proportionate of the sum assured of the insurance, which includes the number of premiums paid as well as the total number of premiums. In case the premium payment for any specific types of life insurance policy is not made on time, and the policy lapses, then the specific policy obtains a Paid Up Value.

Q. How can I revive a lapsed life insurance policy?

Typically, to revive or reinstate a lapsed life insurance policy, the policyholder must send forward an application to the concerned insurance company. After the application, the insurance provider may propose submitting a standard revival form.

However, depending on individual insurance company’s internal policies, the option to reinstate a lapsed life insurance policy may or may not be available.

Q. Who would get sum assured if nominee died before policy holder?

In case the nominee passes away before the policyholder, a request for change of nominee should be filed by the policyholder. For all kinds of insurance, it is the responsibility of the policyholder to ensure that the particulars about their nominee is updated on their insurance.

However, if the policyholder’s insurance allows multiple nominees, and one of them meets with an untimely demise, then the pay-out is given to the other active nominee. Note that this depends on the terms and conditions of the insurance plan and internal policies of the insurance company.

Sources:

[1]https://www.irdai.gov.in/ADMINCMS/cms/NormalData_Layout.aspx?page=PageNo4&mid=2

[2]https://www.pwc.in/assets/pdfs/consulting/financial-services/competing-in-a-new-age-of-insurance.pdf

ARN No: Sept21/Bg/23

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