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The Role of Life Insurance in Managing Financial Risk A Primer for Beginners

Life is full of unexpected twists and turns, isn't it? We never expect to go through what we do, and an extra hand behind us during difficult times feels like a blessing.

What if you could guarantee a helping hand in difficult times? Want to know who and how? Read along to meet your hero of uncertainties of fate: Life insurance.

1. Defining risk management

Financial risk management encompasses strategies and tools to identify, assess, and mitigate potential financial uncertainties, including premature death, disability, illness, or even longevity risk, wherein individuals outlive their financial resources.

2. What is a life insurance?

Like a loyal friend who has your back no matter what, life insurance safeguards you and your loved ones when the going gets tough.

Life insurance is a contractual agreement between an individual and an insurance provider, wherein the insurer promises to pay the beneficiaries a designated sum of money (the death benefit) upon the insured's death.

Let's break it down in simpler terms.

3. Understanding the role of life insurance in financial risk management

Life insurance is like a promise – you pay a small amount regularly, and in return, your insurer pledges to be there for your family if you're no longer around.

It provides your loved ones with the financial support they need to keep going – whether it's paying the mortgage or debt, funding college tuition, or simply putting food on the table and maintaining the family's standard of living.

4. Benefits of a life insurance.

● Financial safeguard for your treasured ones in the event of your death or accidental disability.

● Replacement of lost income for your family.

● Estate planning and inheritance facilitation.

● Tax benefits ( Section 80C and Section 10(10D) of the Income Tax Act 1961).

● A flexible investment tool.

5. Types of life insurance

● Term life insurance

● Endowment plan

● Child insurance plan

● Retirement plan

● Unit-linked insurance plan

● Whole life insurance

● Group insurance plan

● Money-back plan

6. What is the perfect life insurance for me?

Determining the appropriate amount of life insurance coverage involves assessing various factors, including age, income, family size, existing financial obligations, long-term financial goals and changing life circumstances, such as marriage, parenthood, career advancements, or retirement.

Now now! No need to overthink! If the burden feels too heavy, contact a subject matter expert. From the purchase to the claim, they can guide you to avoid claim rejections and get fair claim settlements that ensure your loved ones are cared for no matter what lies ahead.

7. What will it cost?

The cost of life insurance, called premiums, is influenced by several factors, including the insured's age, health status, lifestyle choices, coverage amount, and policy type.

Generally, younger and healthier policyholders tend to get lower premiums, whereas older individuals or those with pre-existing health conditions may face higher premiums. Always research different insurers to find a policy that offers adequate coverage at an affordable price and avoid misselling of insurance policy.

Conclusion

In conclusion, life insurance is a cornerstone of financial risk management, offering individuals and families peace of mind and financial security. Consulting with a Subject matter expert can provide invaluable guidance to avoid any and every insurance claim-related issue or insurance claim rejection services.


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