What are the Key Benefits of Having a Life Insurance Plan ?
By Pardeep Garg
| Published: 09 August 2021
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In this uncertain world, it is important to secure ourselves and our loved ones to tackle unforeseen emergencies. Life insurance is one such tool that provides financial protection and security against untimely events while offering several other benefits like coverage of accident and hospital expenses. A life insurance policy is basically an agreement between the insurer and the policyholder where the company (insurer) provides an assurance of financial benefits to the policyholder’s family in the event of his untimely death. The policyholder has to pay a premium (regular or one time) to the insurance company to get a life insurance policy. There are many benefits of life insurance including death and survival benefits, easy access to funds during emergencies, a regular source of income, etc.
Benefits of Life Insurance Plans in UAE
The life insurance plans offer numerous financial benefits as well as confidence and peace of mind to the policyholder. The policyholder’s family gets an insured death benefit in case of his/her untimely demise and assistance in times of financial needs. Following are some of the important benefits of Life Insurance Plans.
Death Benefits - The policyholder gets an assurance of death benefits in the event of his/her untimely demise. A death benefit is an amount that is paid to the policyholder’s family member in case he/she dies during the policy tenure. Death Benefits can be of great support to the family members in case of death of the sole earner.
Health Expenses and Critical Illness Coverage - Several life insurance plans also cover hospitalisation expenses and provide critical illness coverage from deadly diseases. The insurance plan offers emergency financial assistance in an event of disability or diagnosis of life-threatening disease. Moreover, the life insurance plans with critical illness cover bear all the medical expenses from treatment to medicine and hospitalisation of the policyholder.
Guaranteed Income - The insurance company pays a guaranteed sum to the policyholder’s family member during the insurance tenure. Unlike death benefits, which is paid in lump sum, the guaranteed income is paid on a regular basis depending upon the insurance company.
Wealth Generation - The insurance company provides a two-way advantage to the policyholder. Life insurance acts as a long-term investment as well as life coverage. It means the premium accumulated in the insurance plan is paid back after breaking it down into instalments. This makes life insurance an investment and life coverage at the same time. In addition, certain term insurance plans also provide guaranteed returns on the premium.
Peace, Security and Confidence - Being sure that your loved ones will be taken care of in case of your demise provides peace of mind and a sense of security and allows you to enjoy a stress-free life.
Add on Benefits - Several insurance providers offer added benefits, also called add-on riders, like terminal illness cover, permanent or temporary disability cover, premium waiver, accident coverage, etc. These add-ons are extra benefits and can be included in the basic insurance plan to enhance your policy according to your needs.
Availability of Liquid Funds - The life insurance plans are very supportive to the direct dependent members during untimely events. Investing funds elsewhere doesn’t guarantee quick fund access, but a life insurance plan assures quick and easy financial assistance in case of an emergency.
Types of Insurance Plans in UAE and their Benefits
When it comes to the variety of insurance policies in UAE, each life insurance is designed as per the customers’ needs and comes up with its own features and benefits. Below are the types of insurance plans available in the United Arab Emirates.
Term Life Insurance is a basic and one of the cheapest available insurance policies. It guarantees financial assistance to the policyholder for a predefined duration. The family members of the insured individual receive death benefits if he/she dies during the active tenure of the policy. Some benefits of Term Life Insurance are mentioned below:
The policyholder gets insured for a specific tenure.
Death benefits are paid if the policyholder dies while the insurance plan is active.
Suitable for young people with children, as the plan can assure multiple benefits with considerably low premium payments.
The Whole Life Insurance Plan provides coverage for the entire life of the policyholder and in the event of his/her demise, the insurer pays the death benefit to the policyholder’s family. Moreover, a saving component is also accumulated and is paid as cash value.
Following are some key benefits of Whole Life Insurance.
The policy owner enjoys insurance coverage for his/her whole life.
The policyholder can also earn cash bonuses after the tenure of premium payment is over or as per the rules of the insurance provider.
The premium remains fixed for the entire period of the insurance.
3. Unit Linked Insurance Plan (ULIP)
Unit Linked Insurance Plan or ULIPs are market linked insurance policies that provide financial protection as well as work as a savings plan. ULIPs offer a unique mixture of investment and insurance to the policyholders. The unit linked insurance plan invests the amount into the market to accumulate extra benefits while providing the benefit of life cover.
Following are some key benefits of Unit linked Insurance Plan
The plan offers a long-term savings option in addition to life cover benefits.
The ULIPs also offer partial withdrawal of funds in case of emergencies; however, it depends on the insurance company’s policy.
ULIPs provide flexibility of investment options and the policyholder can choose various plans as per their risk appetite and financial goals.
4. Endowment Plans
Endowment plans are policies that provide maturity benefits as well as death benefits to the policyholder, thereby acting as an investment and insurance plan at the same time.
Key benefits of Endowment Plans are mentioned below:
The endowment plan act as financial protection for the dependant family members during the time of emergencies.
The endowment plans also act as a goal based savings plan.
In addition, certain insurance providers also offer loans against the endowment plan with hassle-free loan approvals
5. Money Back Policy
The money back policies are versatile insurance plans that offer death benefits, survival benefits and maturity benefits. The policyholder receives a percentage of the assured amount at regular intervals in the form of survival benefit. If the person dies during the tenure of the money back policy, then his/her family receives a death benefit. Moreover, when the plan matures, the policyholder gets the maturity amount after deducting the amount received as a survival bonus. Following are the key benefits of money back policy:
In a money back policy, the insured person receives a percentage of the assured sum as a survival bonus throughout the policy tenure or as per the insurance company’s terms and conditions.
The policyholder’s family gets an assured sum in the form of death benefits in case he/she dies during the active policy tenure. The death benefits are paid in full irrespective of survival bonuses that have been already paid.
The policyholder gets the assured sum on maturity after reducing the survival bonuses from the maturity amount.
6. Pension Plan
Pension plans are also referred to as retirement plans and provide financial security after retirement. By paying a certain premium in the pension plan, the policyholder accumulates a considerable sum of money that he/she can regularly receive after retirement.
Key benefits of Pension Plans are mentioned below:
The policyholder receives the pension amount on a regular basis that replaces his/her income.
The amount in pension plans gets compounded during the policy tenure, and hence, helps in rising above the inflation rate.
It’s clear that having a life insurance plan gives financial assurance in adverse situations and provides peace of mind, security, and confidence. The benefits of insurance plans include easy liquidity during emergencies while providing life and critical illness coverage. Moreover, the life insurance plan can also be a great financial tool for savings and investment. Therefore, it is of utmost importance to hold a life insurance plan to be prepared to face an adverse situation and safeguard your loved ones.