Life insurance is a means to financially secure your loved ones in the event of your demise. The whole idea behind getting a life cover is to protect your near and dear ones from sudden loss of financial support. Life insurance gives you peace of mind. Should something unfortunate happen to you, the beneficiaries named in your insurance policy stand to receive the policy benefits.
How life insurance policies work
You buy a life plan from the insurance company and in return you pay monthly or annual premiums. If you were to pass away while the policy is active, the insurance company pays the beneficiaries you’ve named in your policy a specified amount (known as death benefit). The policyholder can choose whether the payout should be made in lump-sum or in installments (annuity).
There are two kinds of life insurance - term and whole life. Both function a little differently from each other.
- Term Life - Term life covers are availed for a shorter period of time, like 10 or 20 or 30 years. When you purchase a term plan, you can have the assurance that the life insurer will pay your beneficiaries a set amount if you pass away during the policy period. In return, you pay regular premiums for the term Now, it must be noted that if you live beyond the policy term, neither you nor your beneficiaries stand to receive any benefits. However, lately insurance companies have started offering term insurance return of premium plans where premiums will be refunded at maturity. The premium rates for TROP plans are higher than other term insurance products.
- Whole Life - Whole life insurance provides coverage for the policyholder’s entire life or up to the age of 99, whichever is earlier, as long as the premiums are paid on time. The beneficiaries stand to receive the sum assured as well as the bonus on it upon the demise of the insured individual. The premiums on whole life plans are generally more expensive than other life insurance products. The reason behind this is because the coverage lasts a lifetime.
Making a claim
When a policyholder passes away, the beneficiaries are required to send a claim intimation to the insurance company. The date, place and cause of death should be communicated to the insurance company during the claim intimation. The insurer will then require the beneficiaries to provide filled-up claim form, policy document, death certificate, hospital certificate, post mortem report and deeds of assignments. Insurance companies generally pay out the claim within a month of receiving the paperwork.
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