Life Insurance

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What is Life Insurance?

Life Insurance is a contractual agreement between the insurer and the insurance company where the insurance company provides a monetary settlement to the nominee in the event of the demise of the insurer. In exchange, the insurer agrees to pay a premium regularly towards the policy. Since it provides a lump sum settlement to the insurer’s nominee, the insurer has to pay an enhanced premium for the policy.

Importance of Life Insurance

Life is full of uncertainties. We do not have the faintest idea of how long we could live in this world. It is essential to be prepared for the worst. In the event of your sudden death due to illness or accidental causes, your family would suffer the most. Though nothing can make up for your physical presence, a monetary settlement would be helpful for your family to carry on with their lives without financial discomfort. Thus, everyone should have life insurance.

Features and Benefits of Life Insurance

Every breadwinner in a family ought to purchase valid life insurance to support their family in the event of their unfortunate demise. Aside from compensating the policyholder’s family, life insurance offers several other benefits. Listed below are the features and benefits of Life Insurance.

  • Loan Collateral
    There are some insurance companies that also offer loans against life insurance policy. Instead of running pillar to post to various banks, you can acquire loans against your life insurance policy. Generally, the loan amount is a certain percentage of the surrender value of the policy.
  • Tax Benefit
    Premium payments towards Life insurance policies are eligible for deduction under section 80C of the Income Tax Act. If the amount of premium paid during a financial year is in excess of 20% of the capital sum assured, then the tax deduction will be applicable for premiums upto 20% of the sum assured. Any amount received on maturity of the policy or amount received as bonus is tax exempted under Section 10(10D).
  • As an investment vehicle
    Besides providing death benefits, some categories of life insurance also serve as an excellent long term investment option. Plans such as endowment plans offer maturity benefits.
  • Loan Collateral
    Those who avail life insurance can mortgage their policy to get a loan from a bank or NBFC. Generally, the loan amount is a certain percentage of the surrender value of the policy.
  • Retirement benefits
    Certain life insurance policies like pension plans will help you in receiving a steady income after your retirement.
  • Online discounts
    As there is no paperwork involved, people who purchase a life insurance policy online can reduce a considerable chunk of their premium related to documentation charges. Also, you get to save on the commission provided to the brokers or other kinds of middle-men.

Types of Life Insurance Policies

  • Term Insurance: 
    It is the primary form of life insurance. In this policy, the insurance company offers a death benefit in the event of policyholder’s death during the tenure.
  • Whole Life Insurance: 
    This plan offers insurance to the holders as long as he lives. Upon the death of the policyholder, the plan provides a sum assured and bonus to his/her nominees.
  • Endowment Plans
    The endowment plan pays the sum assured amount with a profit to the insurer’s nominees after his/her death.
  • Child Insurance plan
    It is a combination of insurance and an investment for your child. There are maturity benefit options available for multiple stages of life for your child like education, marriage etc.
  • Pension Plan
    It helps you with a steady source of income after your retirement. The benefits are provided annually or one time after you reach 60 years, as per the terms and conditions of the plan.
  • ULIP Plans
    It is a combination of investment and insurance. Under ULIP, a portion of your premium goes towards life insurance, and the remainder is invested in stocks, bonds, and debts. You have the option to choose where your funds are invested.
  • Money-back plans
    Money-back plans essentially work like endowment plans. Under this plan, a stipulated sum as the sum assured is paid to the policyholder at pre-decided intervals. In the event of death, the sum assured is paid in entirety to the policyholder’s nominee.

Why should you buy Life insurance policies at AVA insurance?

  • Better Understanding of your requirements
  • Multiple options with options for comparison
  • Expert Fund Management
  • 24/7 customer support

FAQ on Life Insurance Policy

Suppose you are the breadwinner of the family; it is essential to plan your financial needs of your family even in the absence of you. So, buying life insurance is the best way to help your family meet their ends in the event of your premature death.

As per IRDAI guidelines, every insurance provider has to offer a free look period. Usually, the free lookup period is 15-30 days from the date of purchase. If you are not satisfied with the policy, you can cancel the policy.

Most life insurance policies cover accidental death. However, it is wise to read the policy documents carefully as some policies may not offer death benefits due to accident.

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