What is Life Insurance?
Apart from just being a long term tax saving financial instrument, Life Insurance is the most chosen and enrolled fundamental instrument to ensure financial safety of those who are dependent. Dependents could be kids, parents, spouse or siblings. There are some very obvious benefits of having a Life Insurance Policy, lets brief with a few:
Term Plans
In unfortunate events like death of the insured yet earning member in any family can lead to a sudden setback emotionally as well as financially to its dependents. No one can substitute the loss of the member of the family but with the Term Plan, financial losses can be covered initially. This type of policy is provides lumpsum amount to the nominee in case of sudden demise of the Insured.
Money back plans
Money back plans / Endowment plans: These are the plans where the Insured gets the money back either in lumpsum or in regular intervals as per the plan chosen by them. These plans are useful for setting goals of getting incomes at a particular age.
Whole life plan
As the name suggests, such plans provide coverage for the life of the insured. In addition to paying for the demise of the Insured, these plans also contain a savings component which cash value gets accumulated.
ULIP
Also known as Unit Linked Insurance Plans is a non traditional plan which provides the insured with both investment and insurance under a single integrated plan. These plans are market based plans unlike the traditional plans.
Retirement Plans / Annuity Plans
These plans help the insured to get regular payments for life after making a lump sum investment. These are normally One time investment plans. The income from these plans can be monthly/quarterly/half-yearly/yearly depending on your requirements.
Group Life Insurance
Just like group health insurance, group life insurance also provide insurance for a group of people under a Master policy. These type of insurance are mainly used to provide employment benefits for staff.
Key man / Key Person Insurance
These type of insurance are taken by the companies to either insure the company owners / directors / top executive or another individual considered critical for the company. Here the nominee / beneficiary is the company and not any individual.
One more important aspect of Life Insurance is the MWP Act 1874 (Married Women’s Property Act). It was an Act created to protect the properties own by Women from relatives, creditors and even from their own husbands. The section 6 of the MWP Act covers Life Insurance policies under it. Any married man can take a life insurance policy under MWP Act. This is not limited to married men but even divorced husbands or widower can take it. The beneficiary under this Act can be:
☞ The wife alone.
☞ The child/children alone (both natural and/or adopted)
☞ Wife and children together or any of them.
In order to get any policy under MWP Act, an additional form has to be filled and submitted. This form will need details of all the beneficiaries to be included in this Act.
All Life insurance Policies fall under Section 80C of the Income Tax Act. The premium paid for life insurance is eligible for deduction. Also the death benefit or maturity is exempted from tax under Section 10(10D). But Key Man policy and Annuity policies do not fall under Section 10(10D).
