Life insurance policy is a contract between an insurance holder and an insurance company. In this contract, the insurance company/insurer promises a lump-sum payment to a nominated beneficiary upon the death of the insurance holder. As per the contract, the policyholder agrees to pay a premium either on a regular basis or as a lump sum. Contingencies such as terminal illness or critical illness can also generate the payment of benefit. The insurance policyholder may also add funeral expenses as a benefit in the insurance agreement.
Apart from death benefits, a life insurance plan also offers maturity benefits. These benefits are paid as a payout when the insured individual survives the entire term of the policy. Opting for a life insurance plan with maturity benefits not only saves the premium amount if you stay alive but also provides various additional benefits. A life insurance policy also provides a range of tax benefits under section 80C of the Income Tax Act, 1961.
The premium amount paid by the policyholder is determined by the insurance company. Each company considers different factors while determining the premium amount for every individual. But, the policyholder gets an option to pick the term of the policy and the sum assured.
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