Life Insurance

What is life insurance?
Life is uncertain and it is always good to insure as it would help the other family members or dependents. Life insurance is a protection plan and is regarded as the main tool of financial planning. Life Insurance is a contract under which a company agrees to pay a stated amount to the beneficiary or beneficiaries named by the insured. The Life Insurance Company insures the person for a specific amount.

There are two main kinds of Life Insurance:

i) Term insurance: Term life is pure insurance with no cash value account. A term life policy has only one function: to pay a specific lump sum to whoever one has designated upon death. The death benefit and the policy limit are the same. The policy protects your family by providing money they can invest to replace your salary, as well as to cover final expenses incurred by your death.
ii) Whole life insurance: A Whole Life Policy is an insurance cover against death, irrespective of when it happens. Under this plan, the policyholder pays regular premiums until his death, following which the money is handed over to his family.
This policy, however, fails to address the additional needs of the insured during his post-retirement years. It doesn’t take into account a person’s increasing needs either. While the insured buys the policy at a young age, his requirements increase over time. By the time he dies, the value of the sum assured is too low to meet his family’s needs. As a result of these drawbacks, insurance firms now offer either a modified Whole Life Policy or combine in with another type of policy