Don’t use credit cards like this!

World Smile Day was celebrated three days ago on October 1 and there’s a bit of history behind it. It was Harvey Ball, a commercial artist from Massachusetts, who created the smiley face way back in 1963. The smiley went on to become a symbol of good will and good cheer. Ball thought everyone should devote one day each year to smiles. He thought the first Friday in October each year should be World Smile Day.

It is a special feeling to see your near and dear ones smile. There is no better act than putting a smile on their faces.

What brings a smile on their faces is the sense of protection. What better way than life insurance to offer that protection.

What is life insurance?

Life insurance is a broad term. The purpose of life cover is to compensate the family for future income lost due to the unfortunate death of the policyholder. It helps the family maintain a continuity of its finances even if it has lost its breadwinner. In other words it offers financial protection.

Life insurance pays a pre-decided sum to the family in case of the unfortunate death of the policyholder. This amount is called sum assured. The policyholder pays a certain amount of premium every year to your insurer during the policy period.

Life insurance can also be seen as a cover against future events such as marriage in the family or children’s education.

Types of life insurance policies

There are two main types of life insurance policies — term insurance plan and endowment policy.

Term insurance, considered the most affordable type of policy, pays only if death occurs during the term of the policy. The policy period can range from 1 to 30 years in normal cases. There is no maturity benefit here.

There is also a whole life insurance policy which provides coverage during the entire life of the policyholder. The coverage period can be as long as 100 years.

Endowment policy is an investment-cum-insurance product. It pays a lump sum amount — called maturity benefit—if the policyholder survives the policy period.

One factor of utmost importance is that the policyholder should carefully give the details of the nominee who would receive the benefit upon his/her death.

Then there are retirement plans which provide a fixed income after your retirement. You need to pay the premium to create a corpus which will be invested to create post-retirement funds, paid out as a monthly pension.

Today, the market is flooded with life insurance policies from different companies. If you are looking to buy a life insurance policy, there are few points you need to know.

First, choose a policy that suits your objectives best — do not select a policy that suits your son’s education needs the best when you want a policy that should meet your fund requirements for your daughter’s marriage.

Equally important is checking the claim settlement ratio of the insurance company.