New to insurance? Then read this to know how insurance policy works

How insurance policy works

Insurance is not just a word but a life saviour at times. You need to be insured in order to avoid uncertain things in life and to take care of your loved ones even after you leave the world. In this article we will explain you how an insurance policy investment works and do they assure you a sum or life cover.

Term Insurance

In today’s world its utmost important to have an insurance as we are uncertain about tomorrow. An insurance policy is where you pay a certain amount of money to your insurer either monthly or annually as a premium and upon your death, the insurance company pays out a sum to your beneficiaries whom you have nominated while taking the policy. There will be certain formalities which needs to be completed by the beneficiaries and in few days (As per company rule) they can claim the money.

Sum assured is a term which refers to the amount of money an insurance policy guarantees to pay which is also called as cover or the coverage and when the time comes your beneficiaries will definitely get the cover upon submitting the required documents required by the insurance companies as per company rules. It is secured in nature and it’s like investing for your loved ones future where you don’t need to be cautious about the profit or loss as it’s a sure shot investment return in the long run.

Endowment and Children policies

Term insurance plan is another shield for you and your family members which is very beneficial in the long run. For an instance, if you care for your child then you may go for insurance cover for child’s education and you will get their future secured as at the time when they need they would be able to claim the cover from the insurance and continue their further studies. Same way you may also go for a cover for your retirement by paying an annual or monthly premium as required by your insurer and by the time you are retired, you may not have to worry as you know that you already have an insurance cover to take care of your needs.

How it is different from Stock market investments?

We all care about our loved ones and we save as much as we can for their future but when we invest in shares or stocks there is a possibility of losses and when you save in the bank there is a very minimum interest you receive in return but in an insurance policy, you pay a little either monthly or annually and the cost for the premium differs depending in the various companies and their policies but it guarantees you a cover for sure. You will never end up regretting and can breathe in peace while you are alive as it gives you a relief that even when you are gone, your family will not be financially affected, provided death occurs within the policy tenure or term in case of life cover. But if it is term insurance, the nominee will get the sum assured the moment the policy matures.

Also read – 5 Reasons to Invest in Mutual Funds compared to Direct Shares

Is it a profitable investment?

Some takes the insurance policy as an expenditure while it’s a profitable investment for the wise who knows how it works. Some of the paperwork is mandatory to claim the money by the insurer and need to produce some required documents but when all of that is been done, in few days the beneficiary will be able to claim the money and can live a sustainable life economically and financially.

Tax benefits of having insurance policy

If you have an active life insurance policy, you can apply for exemption from income tax for the amount you are paying as premium. This is wisely used by many salaried as well as businessmen to avoid tax and save money.

An insurance policy is like a shield which will block all the financial crisis which your family may have to suffer from if you are not insured during your time of death. You will be leaving them behind with a burden if not insured and a gift if you are.

Think wisely and get an insurance shield for yourself and family to live in peace of mind.