Term Insurance and Investment Plans

Term Insurance and Investment Plans

Term Insurance
Term Insurance

insurance factor

Here are some areas that will help you better understand ‘what is insurance’ and how it works:

insurance premium policy

Insurance policy premium is the amount you pay to purchase a certain amount of insurance. It is usually expressed monthly, quarterly, semi-annually or annually as a regular price you pay during the premium paying period.

Insurance companies use various factors to calculate insurance policy premiums. The idea behind this is to check the eligibility of the insured for the particular type of insurance policy he wants to buy.

For example, if you are healthy and have no medical history of serious physical illnesses, you may pay less for a health insurance or life insurance policy than someone with multiple illnesses.

You should also be aware that different insurance companies may ask different premiums for the same policy. Therefore, it takes some effort to choose the right thing at a price you can afford.

policy limits

It is defined as the maximum amount payable by the insurance company for loss under the insurance policy. It is determined based on the term (policy term), loss or injury and other similar factors.

Generally, the higher the policy limit, the higher the premium. For a life insurance policy, the maximum amount that the insurer will pay to the nominee is called the sum assured.


The deductible for an insurance policy is the amount or percentage that the policyholder agrees to pay out of pocket before the insurer settles a claim. You can think of this as a hindrance for most people in filing small and minor claims under their insurance policies.

Exclusions apply to a claim as defined by the terms of a policy or a particular type of policy. Generally, insurance policies purchased with higher deductibles are less expensive, resulting in higher out-of-pocket costs and fewer claims.

How does insurance work?

As defined above, an insurance policy is a legal contract that binds the policyholder and the insurance company to each other. It contains all the details of the conditions or circumstances under which the insured or the policy nominee can receive insurance benefits from the insurer.

Term Insurance
Term Insurance

Insurance is a way to protect you and your loved ones from financial crisis. You buy an insurance policy for this, but the insurance company takes the risk and provides coverage at a fixed premium.

In case of any incident, the insured or the nominee can file a claim with the insurer. Based on the claim assessment criteria, the insurer will review the claim application and settle the claim.

Types of Insurance in India

The four most common types of insurance that people buy:
medical insurance
motor insurance
home insurance
insurance benefits
Insurance policies benefit people and society in many ways. Apart from the obvious benefits of insurance, there are some others that are not talked about or talked about much.

1. Hiding against uncertainty

This is the most important and significant benefit of insurance. Insured persons or companies receive compensation under insurance policies. Buying the right kind of insurance policy is, in fact, a way to protect yourself from losses caused by various uncertainties in life.

2. Cash Flow Management

Uncertainty in out-of-pocket payments has a significant impact on cash flow management. However, by having an insurance policy with you, you can manage this uncertainty easily. The selected insurance provider pays when the insured event occurs.

3. Investment Opportunities

Unit Linked Insurance Plan Invest a part of the premium in market-linked funds. This way, they help you invest regularly and meet your life goals with the benefit of market-linked returns.
Also read: What are investments and what is its purpose?

Tax benefits of insurance

Apart from the protective benefits of insurance policies, you also get income tax benefits.

Section 80c
Premium paid for purchase of life insurance policy is eligible for deduction from taxable income under Section 80C of the Income Tax Act. The maximum limit of these deductions is Rs. 1.5 lakhs.
Section 80 d
The health insurance premium paid to purchase a policy for you and your parents is also tax deductible under Section 80D of the Income Tax Act, 1961.
Section 10(10D)
Tax benefits of life insurance and ULIPs in India include tax exemption under Section 10 (10D) on maturity amounts or payouts of these insurance plans. This is subject to the applicable terms and conditions specified by the tax authorities as updated from time to time.

You can claim these tax benefits of insurance while filing your income tax return.

Get insurance to be safe

Being safe with insurance is essential in our times. Although many people invest in various types of insurance, not everyone is aware of the many benefits it offers. Insurance like life insurance protects not only you but also your family’s financial future in a safe and affordable way. Also, investing in life insurance encourages a regular habit of saving money. Hence, it enables you to build a significant corpus.

Insurance plans like term plans and health insurance plans from Max Life Insurance help you and your family secure financial health and avail more benefits. So, now that you know ‘what is insurance?’, how does it work, get the right insurance for you and stay safe!

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