In this uncertain world, giving your family financial backing is important. The Covid-19 pandemic has taught the world how important it is to plan one’s life by reality. Life insurance is one such contract that ensures your family will have financial security, even when you are not around to take care of them. So, if you have started earning or are newly married, it may be time to learn the meaning of a life insurance policy and sign your first policy contract.
What Is A Life Insurance Policy?
A life insurance policy is a contract signed between an insurance provider and a policyholder, which provides financial security to the policyholder’s beneficiaries if they pass away.
As the policyholder, you will be required to pay premiums and, in return, the insurer pays a lump sum of money to the beneficiaries upon your demise. These funds can be used to cover expenses such as outstanding debts as well as provide financial support for your dependents.
Life insurance policies can be of various types such as term insurance, whole life insurance, unit-linked insurance plans (ULIPs), and more. It is important to choose a plan that suits your specific needs and financial goals.
Understanding The Details Of A Life Insurance Policy
If you have decided to get a life insurance policy, then you must ensure to understand the policy details. You must understand the policy and explain the same to your family for everyone to know the clauses and claiming conditions.
1. Basic Information
The initial pages of a life insurance policy will be a detailed summary of all the facilities you can enjoy. You will be notified about the benefit amount of the policy in the first few pages. Following that, other information that you will find in this section includes:
- Details of the insurance company
- Type of plan, as per the company’s decided policy options (term insurance, unit-linked insurance, endowment plans, and others)
- Decided term of the policy
- Signature of the authorized individual or representative of the insuring firm
- Face amount or the benefit amount (the money that the insurer has agreed to pay as per policy guidelines)
- Premium amount details
- Name of the insured individual
- Policy number and issue date
- Premium payment model (such as monthly, quarterly or annual).
2. Coverage Information
The next part of the policy will give you an insight into the major policy details. Here, you will learn what the insurance company covers and your rights as a policyholder.
For instance, you will get information on how you can borrow money from the insurer against the cash value of the policy or change your beneficiary. Apart from these details, the life insurance policy will also cover details such as:
- Premiums: This section will show the future premium payment dates and associated information. Following this, you will get details on cash value and death benefits. If there is any possibility of a change in the cost of availing the insurance policy in the future, then the specific information will also be mentioned in this section.
- Settlements or Claims: This section explains how the policy beneficiary can claim the insurance amount. Other ways of availing of policy benefits will also be mentioned.
- Added Benefits: If there is any scope for adding more benefits or changes to the policy with an extra premium cost, then those options will be listed in this section.
Why Is Getting A Life Insurance Policy Important?
Now that you have understood the life insurance meaning and the policy details, it is time you look at why you need the insurance coverage:
1. Financial Protection
Your loved ones and their families should always be financially protected if you aren’t there to look after them. Your life insurance policy will take optimal care of this with a great benefit amount.
2. Ensure Peace of Mind
With the life insurance policy active, you can be assured that your family won’t have to depend on anyone else for financial support.
3. Debt Repayment
If you have debts to pay off but an unfortunate event occurs, the insurance policy can partially cover your unpaid credit card, consumer, or vehicle loans. It will help reduce the financial hardships for your family and help them cope with the situation.
To Sum Up
A life insurance policy is an important financial instrument with various benefits. All you need to do is choose the right policy per your preferences and requirements. Following this, you just have to ensure to pay your premiums on time. Make sure you read all the policy-associated documents very carefully before signing them.