Life Insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a sum of money to the beneficiary when the insured person dies or after a predetermined period in exchange for the premiums paid by policyholder.

In a life insurance policy you need to pay premiums for a specified policy term and the life insurance company provides you with a comprehensive life cover, in return. Life Insurance protects the future of your loved ones by paying a lump sum amount referred to as death benefit if an unfortunate event occurs. Some life insurance policies provide you a Maturity Benefit after the end of the policy term.

Life insurance is a legal contract where you pay a small sum as a premium for ensuring a large protective sum. The insurer will make the large sum available to your family and dependents in the case of your untimely demise.

Usually, life insurance is available for a limited period. Thus, if your death occurs within this period the life insurer is bound to pay a death benefit, which is also called sum assured. However, in the case of your surviving the term, you may receive a maturity benefit depending on the type of life insurance.

Whole life insurance plans however, are more likely to pay the death benefit than maturity benefit

Benefits of Life Insurance Plans

Life insurance plans are long-term investment and protection plans with several benefits. A few of the most prominent benefits of life insurance plans are:

1. Financial Protection
A major benefit of any life insurance plan is that it provides financial security to your family members. Life insurance policies include a death benefit. If you die during the term of the policy, then a predefined amount, known as the sum assured, is given to your family members.

This ensures that your family members are financially secured even after you are not present with them.

2. Helps in Tax-Savings
To promote savings and investment, the government has made many investment instruments eligible for tax savings. Life insurance is one such instrument. You can avail of a tax deduction of up to Rs 1.5 lakh towards the premium you pay in a year u/s 80C of the Income Tax Act 1961. Thus, you have the benefit of investment as well as tax savings.

3. Achieve your Big Financial Goals
Some life insurance policies build a cash value over time. Life insurance policies such as ULIP, have an investment component as well. Your premium is invested in marketable securities and earns a return. With time they build into a large corpus that can be used to achieve goals such as your child’s education, child marriage, etc.

4. Wealth Protection & Distribution
Life insurance plans are one of the safest long term investment options. Thus, a life insurance will mean you can preserve your wealth for a long time against tax and inflation. This feature means that a life insurance plan is also a great instrument for retired investors to generate long-term pension.