Elementary Guide: Features of Life Insurance
Table of Contents
A life insurance policy is a contract between an insurance company and a policyholder that offers financial coverage in the unfortunate occasion of the policyholder’s death during the tenure of the policy. It is offered in exchange for a fixed rate of premium that is payable till the date of death of the life assured. If you were to meet with an untimely death, a life insurance policy would guarantee the fiscal well being of your nominee by paying them the death benefit under your insurance policy. It is specifically designed to relieve your loved ones of any monetary distress and ensure their overall welfare.
Apart from lifelong protection, a life insurance policy also comes with certain features that are common to all despite its varied types. The following are a list of 5 key features of life insurance policies -
1. Life Cover
As the name suggests, life insurance policies offer insurance coverage for the entire lifetime of the policyholder. It usually offers a policy term of 100 years. As you grow older, your susceptibilities increase and you are at a greater risk of suffering from different ailments. Hence, having a policy that will offer financial assistance till your demise becomes important. In such cases, the long life cover of life insurance policies are truly useful as it assures you of a secure financial back up till death. Offering protection for your whole lives, it acts as a steady source of funds that will support you andy our family members during times of monetary distress.
2. Death Benefit
This is a key feature of life insurance policies. If the policyholder suffers from premature death before completing the policy tenure, the sum assured on death is paid to their nominee and the policy is terminated. They can receive this payment either as a lump sum or in periodic installments as per the terms and conditions of the policy. If the policyholder survives the complete tenure of the plan, they can receive a lump sum maturity endowment fund in addition to the sum assured at maturity. It thus enables people to protect individuals themselves, as well as their families.
3. Investment Opportunities
Certain life insurances come with an in-built investment opportunity. This feature enables a policyholder to invest in money market instruments and increase the amount and volume of their personal wealth, besides already receiving a life insurance cover. In order to avail this service, investors have to pay two different premiums. One is paid towards the insurance and the other is paid for being invested in debt, equity or both. Some life insurance policies also come with a ‘switching’ feature that allows you to navigate your investment funds between the different fund options as per your risk profile and financial need. This feature of life insurance policies is not doubt the best of both worlds!
4. Liability Coverage
This feature of life insurance policies allows policyholders to avail additional funds as a loan from the insurance company to pay off their debts and financial obligations elsewhere. Sometimes, it might become very taxing to provide for all needs and requirements of your family while repaying a loan without a steady source of income. It is in such cases that a life insurance policy will come to your aid by offering ‘liability coverage’ against student loans, mortgages or credit elsewhere. It ensures that your family is relieved of additional financial distress by steadily meeting your loan requirements, even in your absence.
5. Riders
Riders are an added feature of life insurance policies. It can be purchased to increase and augment your life insurance cover. Riders are of several kinds, ranging from a Critical Illness Rider to Accidental Total Permanent Disability Rider that help protect you and your loved ones against the unforeseen exigencies in your life.
These are the 5 key features of any life insurance policy, although there might be variations in terms and conditions of different plans. Life insurances seek to offer a maximum protection to you and yout family and help insure your dependents with a variety of options and benefits. Hopefully, by understanding these features you will be better informed while investing in life insurance.
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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
