Important of life Insurance Plan

October 26, 2023

Life insurance is a contract between an individual (the policyholder) and an insurance company. In exchange for regular premium payments, the insurance company provides a financial benefit to the policyholder's beneficiaries upon the death of the insured person or after a certain period, depending on the type of life insurance policy. The primary purpose of life insurance is to provide financial protection and support to the policyholder's loved ones in the event of their death. 

Here are some key aspects of life insurance:

Death Benefit: The core benefit of a life insurance policy is the death benefit. This is a lump-sum payment made to the beneficiaries (usually family members or loved ones) when the insured person passes away. The death benefit is typically income-tax-free for the beneficiaries.

Premiums: Policyholders pay regular premiums to the insurance company, either monthly, quarterly, or annually, to maintain the life insurance coverage. The cost of premiums is determined based on various factors, including the insured person's age, health, the coverage amount, and the type of policy.

Policy Types: There are different types of life insurance policies, but the two primary categories are:

  • Term Life Insurance: Provides coverage for a specific term (e.g., 10, 20, or 30 years). If the insured person passes away during the term, the death benefit is paid to the beneficiaries. If the term expires and the policyholder is still alive, there is no payout.
  • Permanent Life Insurance: Provides lifelong coverage and includes a savings or investment component. Permanent life insurance policies, such as whole life or universal life, accumulate cash value over time, which can be accessed during the policyholder's lifetime.

Cash Value (in Permanent Life Insurance): Some life insurance policies, like permanent life insurance, have a cash value component. A portion of the premium payments is set aside and invested, allowing the policy to accumulate cash value over time. This cash value can be accessed by the policyholder during their lifetime for various purposes, such as loans or withdrawals.

Beneficiaries: Policyholders can name one or more beneficiaries who will receive the death benefit when the insured person passes away. Beneficiaries can be individuals, organizations, or trusts.

Riders: Life insurance policies often offer additional features called riders. Riders can provide extra coverage, such as for critical illness, disability, or accelerated death benefits, depending on the policy and the insurance company.

Five most important factor of Life Insurance

When considering life insurance, there are several important factors to keep in mind to make an informed decision that aligns with your financial goals and needs. Here are five of the most important factors to consider when evaluating life insurance:

Type of Policy:

  • There are different types of life insurance policies, including term life insurance and permanent life insurance (whole life and universal life). Understanding the differences between these types is crucial. Term life insurance offers coverage for a specific term, while permanent life insurance provides lifelong coverage and includes a cash value component.

Coverage Amount:

  • Determining the right coverage amount is essential. It should be sufficient to meet the financial needs of your beneficiaries in the event of your death. Factors to consider include your family's living expenses, outstanding debts, future financial goals (e.g., education, mortgage), and any other financial obligations.


  • Premiums are the regular payments you make to maintain your life insurance policy. It's crucial to evaluate whether the premiums fit within your budget. Premiums vary based on factors such as your age, health, type of policy, and the coverage amount. Be sure to understand how premium costs may change over time, especially with some types of permanent life insurance.

Underwriting and Health Considerations:

  • Your health and lifestyle play a significant role in determining the cost of your life insurance policy. Insurers typically require a medical exam or a review of your health history. If you have pre-existing health conditions, it can affect your eligibility and premium rates. It's important to be honest during the underwriting process.

Beneficiaries and Policy Riders:

  • You'll need to designate one or more beneficiaries who will receive the death benefit when you pass away. Review and update your beneficiary designations as your life circumstances change. Additionally, consider any policy riders or additional features that may be available to enhance your coverage, such as critical illness riders or disability income riders.

While these are five of the most important factors, it's essential to consult with a qualified insurance agent or financial advisor who can provide personalized guidance based on your specific situation. Life insurance is a significant financial decision, and selecting the right policy requires careful consideration of your current and future needs, as well as an understanding of the policy's terms and conditions.

Find your suitable insurance plan

Speak to our advisor

Full Name
Email id
Mobile No

Top Insurance Companies