Life insurance is something that is essentially an agreement between the insurance provider agency and the individual purchasing the insurance, through which the company ensures to pay a certain sum to the beneficiaries of the individual upon his/her death.
The individual who is buying the policy typically has to pay some amount in the form of premiums in exchange for such an agreement until his/her death. It is recommended to buy a life insurance policy for persons who have some financial obligation or want their family members to have some financial security through life insurance covers death.
Thus, what life insurance covers and what is offered within it will be discussed in this article.
Types of Life Insurance Policies and Understanding Life Insurance Coverage Types
Depending on individual needs and requirements, various types of life insurance policies are readily available in the market. Thus, it is essential for individuals who want to buy a policy to essentially have the necessary information regarding various types of life insurance policies offered.
This will not only help in making an informed decision but through this individuals can assess their needs and customize various policies to their requirements.
Term Life Insurance
Term life insurance is a type of insurance policy that offers all the major benefits of a life insurance policy but only for a limited period of years. Individuals with budget constraints or ongoing financial obligations may opt for this policy.
Since these policies are usually cheap and for a limited period of years, they will not take out too much from the pocket but will give all the benefits of the regular policy.
Various types of terms are offered within the structure of a term life insurance policy, ranging from a Decreasing term to a Convertible type of term to a Renewable term.
In a Decreasing term type of policy, individuals have the total Life insurance Coverage of the policy decreased with age which is usually fixed based on the rate specified in the initial policy documents.
Furthermore, in a Convertible term life insurance policy all the things that are given in a term life insurance policy are usually the same, instead the convertible term insurance policy lets individuals convert their policy to a permanent policy at the end of their term.
Lastly, a Renewable term life insurance policy requires individuals to renew their policy at the end of every year according to provided quotes. This process essentially results in individuals paying a lower premium at the start of their policy which gradually gets changed over time.
Since individuals have to pay lower premiums at the start of the policy these kinds of policies usually cost less overall compared to other term life insurance policies.
Permanent Life Insurance Policies
A permanent life insurance policy is another type of life insurance policy that is usually a bit more expensive than a term policy but it ensures that the individual gets the Life insurance Coverage and remains active throughout his/her life as long as the person pays the premiums.
The Life insurance Coverage offered within these policies is lifelong and thus there are various types of Permanent Life insurance policies one can avail.
Thus, there are usually four kinds of permanent life insurance policies: whole Life Insurance Policies, Universal Life Insurance Policies, Indexed Life Insurance Policies, and Variable Universal Life Insurance Policies.
These policies greatly differ, so it is essential to carefully examine and analyze all the policies before making a decision.
So, a Whole Life Insurance policy is also a type of permanent life insurance policy, which will offer you Life insurance Coverage throughout your life. These are some of the simplest life insurance policies with a cash value component that gets active when an individual dies.
The cash value component essentially allows the individual's beneficiaries to use the cash for different purposes as the whole amount is disbursed altogether.
Whereas a Universal Life insurance policy which is very similar to a whole life insurance policy, has an interesting aspect. This means the cash value component gains interest over time and the premiums offered by these policies are flexible and prone to adjustments.
Furthermore, an Indexed Universal Life Insurance Policy gives a fixed rate of return within the life of the insured individual based on the amount of cash component involved.
Lastly, a Variable Universal Life policy allows individuals to invest the cash component in a separate account, which eventually gives returns. Furthermore, individuals opting to go for this policy have the option to opt for either a constant death benefit coverage or increasing Life insurance Coverage.
Common Exclusions in Life Insurance Policies
A life insurance exclusion is a type of clause within the policy that prevents any individual from getting the benefit or Life insurance Coverage of the policy at the end of the policy, i.e. after the person’s death. This means that there are certain situations specified within the policy contract that have been excluded from getting Life insurance Coverage.
The first and foremost exclusion almost all policies have in common is the ‘Suicide’ exclusion which means that if any person has died by suicide then the beneficiaries will not get any money insured in the policy.
However, it is not like the suicide clause continues throughout the policy, rather most policies have an amount of time during which the exclusion remains active which can range from 1 to 2 years.
The other types of exclusions that are given in the policy are Acts of war which means that if there is a situation where the country where the individual lives in gets entangled in the ongoing war then the policy will lapse.
Furthermore, the exclusion is also extended to individuals serving in the military at any period. Apart from that deaths occurring due to Air traffic accidents are also some of the common exclusions in the insurance policy
Tips for Choosing the Right Life Insurance Coverage
As we have discussed all the aspects of a life insurance policy, it is also essential to know the ways through which you can choose the best life insurance policy and additional coverage possible for yourself. Thus, this section will focus on how you can maximize your coverage and get the most out of your policy.
Knowing your needs is probably the first and most vital aspect of choosing a life insurance policy. Thus, knowing how much-estimated coverage you want will help you a lot; for instance, you may want to add coverage for the college and schooling of your children, or you may want to ensure that your financial obligations like loans, etc are taken care of.
This way, analyzing and coming to a decision about your policy needs will essentially result in better decision-making.
Carefully Preparing the Application: This is also a very important step when applying for a health insurance policy since any wrong information could potentially result in delayed claims or even claim rejections.
Thus, ensure that you have filled out all the particulars regarding your age, gender, health history, smoking or drinking frequency, and driving record correctly and attached all the related documents.
Lastly, while buying a policy, it is essential to compare various policy plans available in the market and, if possible, get quotes from different companies. Nowadays, it is also very easy to compare policies, as the information is available online.
Conclusion
As discussed earlier, life insurance is an essential aspect of people’s lives nowadays, and with an increase in demand, various companies sprout to provide insurance policies. In such markets, it is easy to get a low-cost policy.
However, not all low-cost policies have benefits, and that is why you should always check the financial credentials and Claim Settlement Ratio of the company before making a final decision. In this way, you will get the best life insurance company in India and the most trusted policy.
