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Sunday, 15 November 2020

All About Insurance | Life Insurance | Link

All About Insurance | Life Insurance | Link

Life Insurance?

Life Insurance acts as financial protection for your family in case of your death or a payment made to you on surviving the policy term. In return for this payment, you make periodic fixed payments to the life insurance company. In certain types of policies, there is an option to get critical illness benefits or create additional protection for your family if you pass away from an accident. You can read about these features and types of life insurance policies below.

Need of Life Insurance?

  • Illness Protection: As you head towards retirement, life insurance policies that cover critical illnesses become important. Some life insurance policies offer you features that cover you from severe ailments like heart attacks and cancer. Buying these types of policies can protect you from some of the world’s most deadly diseases.
  • Family Support: If you have a spouse and kids, the need to build a safety net for them becomes important. You would want to protect them from financial hardship in case of your untimely demise. You can also get good returns with life insurance by investing in some policies.
  • Savings Growth: In your early years of working, some life insurance plans can be a useful ways to save and invest your money. ULIPs or Unit Linked Life Insurance Policies allow you to invest in equity and debt markets. Under current tax laws (which are subject to future amendment), you also get tax deductions for investment in life insurance policies and on the maturity amounts of such policies.
  • Debt: We often take large loans in our working life, especially when it comes to buying a house. An untimely death while the loan is still due can have grave economic consequences for our families. In such a scenario, life insurance money can be used to pay off the loan.



The cash value of an insurance contract, also called the cash surrender value or surrender value, is the cash amount offered to the policyholder by the issuing life carrier upon cancellation of the contract. This term is normally used with a life insurance or life annuity contract. To receive the cash value, the policyholder surrenders their rights to future benefits under the policy. Cash values are usually associated with whole life insurance or endowment life insurance and other forms of permanent life insurance. The contract determines for each possible cancellation date the related cash value. If the investment of premiums is contractually made in an individual account, the cash value is the value of the investments in that account at any particular time minus a surrender charge. Such cash value credited to an individual account during the tenure of the policy keeps growing with every payment of premium. It also increments due to interest credited. The policyholder may also be able to use the cash value as collateral on a loan. The cash value will often be similar or even equal to the reserve to be held by the insurance company for the net obligations from the contract. As such, the amount is usually invested and earns investment income for the insurance company which is to some extent forwarded to policyholders of participating contracts. Since often initial premiums are not invested but covering initial costs associated with selling the contract (up front or front-end fee), the amount available may be significantly lower than the sum of premiums paid for some time, initially even zero. Later, interest credited might compensate that initial loss. The value of the investment is often subject to a surrender charge in determining the cash value. A surrender charge offsets the costs associated with selling the contract and allows these contracts to be sold with little or no up front fees. Surrender charges are imposed when a contract is cancelled within a set time frame. Any cancellation after that time frame are not subject to a surrender charge. Typically surrender charges decrease on an annual schedule until they disappear altogether.

One thought on “All About Insurance | Life Insurance | Link

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