If you are wondering what is life insurance meaning, you should know that a life insurance policy is a contract between an individual and an insurance provider, in which the insurance company gives financial protection to the policyholder in exchange for monthly fees (known as premiums).
As per the life insurance definition, the insurance company pays a sum assured to the policyholder or to the named nominees in case the policyholder meets with an untimely demise in exchange for the premium payments made towards a life insurance policy.
Based on the arrangement, in the event of the death of the policyholder or, if the policy matures, the insurance provider shall pay the person or his family a lump sum amount after a certain amount of time. There are different types of life insurance policies to suit the individual needs and requirements of the policy buyers.
Understanding life insurance definition, its benefits and features is important before you buy one. Read on to know more about what is life insurance meaningfor you.
What Are the Benefits of Life Insurance Plans?
Once you get an understanding of what is life insurance meaning, as well as the different types of life insurance policies, you will find that there are 3 main advantages of getting the best life insurance policy that you should know about. Following are the 3 primary benefits offered by different types of life insurance policy:
1. Financial Security
Life is unpredictable and can be full of uncertainties. It is difficult to reduce the possibility of an unfortunate event like death. In such a scenario, the family faces financial constraints arising from the lack of a steady income.
2. Long-Term Savings
If one wants to make long-term investments, it’s important to think about life insurance meaning. Such insurance plans help you make systematic savings and create a corpus, which can be used for several reasons, such as building a new home, financing quality schooling for your child, and funding a child’s marriage expenses.
3. Investment Options
Understanding the meaning of life insurance in your financial context will allow you to plan your investments efficiently as well. Life insurance providers offer Unit-Linked Investment Plans (ULIPs), which are mainly investment instruments based on the market linked returns and life insurance, meaning you can get dual benefits with a single financial product.