The basic idea behind life insurance is that if something unfortunate happens to the policyholder, his/her family can continue leading a comfortable life
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A Beginner's Guide to Life Insurance
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The year 2020 saw an unprecedented event when a small virus brought the whole world to a standstill. When it started to seem like the pandemic was just about to be over, the second wave of the Coronavirus spread came seemingly out of nowhere and wreaked havoc across the country. The number of daily reported cases hit a record high of over four lakh infections during the first week of May and by mid-June, the total number of infected people in India had reached almost 30 million, second only to the US. [1]
Meanwhile, almost four lakh people died in the country due to the deadly virus, many of them the breadwinners of their families. [2] According to official reports, almost half the people who died of COVID-19 were aged below 60 years. [3] These unprecedented circumstances establish the importance of having a sound financial back-up plan in the form of a life insurance policy to protect your family financially in your absence.
With so many families left to fend for themselves due to the loss of the sole income-earning member, a life insurance policy in such situations can come to the rescue as it can help the family to overcome financial difficulties, if not the emotional setback of the loss.
Why Life Insurance is Important
Life Insurance is a financial cover for a contingency linked with human life, i.e. death While a value cannot be ascribed to a human life, a monetary sum could be determined based on the loss of income in future years. Since there is loss of income to the household when human life is lost , the payout from a life insurance plan can provide comfort in such times by compensating for the lost income.
Life insurance is an instrument to ensure that your immediate family has some financial support in the event of your untimely demise. It could be to repay debt like a home loan or achieve financial goals like children’s higher education or old-age care for parents or spouse. Primarily, anyone who is an income-earner and has some dependents can go for life insurance.
How Much Cover Do You Need?
The basic idea behind life insurance is that if something unfortunate happens to the policyholder, his/her family can continue leading a comfortable life. That is possible only if the payout under the insurance policy is enough to compensate for the lost income due to the death of the policyholder for a reasonable number of years. While there is no one-size-fits-all formula, you must consider your present lifestyle and future needs while arriving at a figure. In case sum assured is not carefully evaluated based on the future needs of the family, the insurance proceeds may exhaust sooner than you know.
Which Policy Is Right for You
There are various types of life insurance plans available in the market but most popular among them are Term Insurance Plans and Unit Linked Insurance Plans (ULIPs).
Term Life Insurance
In case of a term plan, a policyholder pays premium to the insurance company to get coverage against death. In case of the policyholder’s demise within the policy period, the insurance company pays the sum assured to the nominee(s). It is one of the preferred life insurance product as it provides a significantly large cover at affordable premiums. For example, you can get Rs 1 crore cover from Bajaj Allianz Life Smart Protect Goal - A Non-Linked, Non-Participating, Pure Life Term Insurance Plan for a small premium of Rs. 21 per day*. Not only that, the plan also offers you the option to get back the premium# at the time of maturity. Moreover, it not only protects you against death but also against financial loss from 55 critical illnesses#. Multiple variants of the plan are available to meet your unique needs.
Unit Linked Insurance Plans
ULIP or Unit Linked Insurance Plan is a type of life insurance policy, which offers you the benefits of market linked wealth creation and life insurance coverage. They are amongst one of the preferred choices for securing one’s long-term life goals. Policyholders get the opportunity to invest in a number of market-linked ULIP funds depending on their risk profile and investment horizon. Simultaneously, they get to enjoy the benefits of life insurance cover. Through the investment component, policyholders can invest in equity, debt funds or a combination of both depending on their choice. You can choose the Bajaj Allianz Life Goal Assure - A Unit-linked Non-Participating Life Insurance Plan where life cover charges are returned at the time of maturity$. The plan comes with four different investment portfolio strategies and eight different funds to choose from in order to meet your life goals.
Both term insurance and ULIP plans come with tax benefits at the time of investment as well as at the time of maturity as per the Income Tax Act 1961, subject to conditions specified therein. Either of these, or a combination of both can be made part of your financial plan, depending upon your age and life goals. However, make sure you choose your service-provider carefully, like Bajaj Allianz Life Insurance, so that you have the peace of mind that your family would be protected financially even in your absence.
References –
[1] https://www.worldometers.info/coronavirus/country/india/
[2] https://www.worldometers.info/coronavirus/country/india/, https://economictimes.indiatimes.com/news/india/centre-working-on-packages-for-those-who-lost-sole-breadwinner-orphaned-children/articleshow/82985618.cms
[3] https://science.thewire.in/health/india-covid-19-mortality-comorbidities-age-health-ministry/
* Above illustration is considering Male aged 25 years | Non-Smoker | Life Cover Variant | Policy term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Non-medical rates | Annual Premium Payment Mode | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only.
# Product feature/benefit mentioned above are dependent on variant
$ Return of life cover charges = return of mortality charges (ROMC) which is payable on maturity, provided all due premiums have been paid.
BJAZ-WEB-ECNF-01254/21
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