Life Insurance
Life Insurance
Life insurance is an absolute necessity these days. Due to the ever-increasing rate of death in India, you need to consider your work life and your family members. A life insurance policy covers your immediate family in case of unfortunate death and gives them financial relief as well. To be in a good situation to choose a policy that will best suit your needs, you should be aware of precisely what a life insurance plan is before you buy one for yourself.
This article breaks out everything you need to know about Life Insurance in India.
What exactly is Life Insurance?
Life insurance is described as a legal agreement/contract executed by the insured and an insurance company. The amount of money that will be provided to the beneficiary or nominee upon the policyholder’s passing is determined under this agreement. These plans are well recognised for giving total peace of mind to the policyholder.
What are the types of Life Insurance?
Every individual has a different set of requirements from an insurance policy. To cover all those requirements, a wide range of health insurance is available.
Term Life Insurance Policy is among the country’s most popular life insurance plans. As the name suggests, you receive life insurance coverage for a period of time – “term”. This term usually covers 10, 20, 30 or even more years. The premium amount of these plans increases with the number of years covered under this policy. If you pass away unexpectedly, your nominees will be paid an 8-figure death benefit.
In contrast to its counterpart, Term Life Insurance with Return of Premium is a form of term life insurance plan that provides maturity benefits. You may get coverage for up to 20 years or more, and you will get the premium sum if you live out the policy period. The candidates specified on the insurance are provided death benefits if something tragic happens to them.
Whole life insurance plans, sometimes referred to as traditional full life insurance policies, provide a death benefit for the duration of the policyholder’s life. Whole life insurance policies are specially designed life insurance products that aim to provide the insured with entire life coverage so they may lead a financially secure life and provide a backup net in the case of sudden death.
Endowment life insurance plans offer the policyholder a unique solution of both insurance and savings. In addition to the regular life coverage, these life insurance policies also enable regular savings over time in order to get a lump payment at the time of maturity.
Many individuals face the dilemma of choosing between insurance and investment. ULIP Life Insurance makes your decision-making easier by offering two-in-one coverage as it provides both investing options and life insurance. It is a form of life insurance with a minimum of a five-year lock-in term, making it an instrument for long-term investments that offer risk mitigation.
As the name implies, money-back life insurance policies are among the well-liked categories of life insurance plans that consistently return money to the policyholder in India. Unlike other forms of life insurance policies, which give no returns until maturity, it returns a portion of the total insured sum during the course of the plan.
As one of the most popular components of employee benefit packages, Group life insurance currently offers coverage to a huge number of working individuals in India. These plans can be further divided into group term life insurance and group whole life insurance plans.
A child insurance plan is a sort of life insurance that combines investment and insurance to assist you in providing for your child’s financial requirements. Your ability to build wealth for your child’s future requirements, such as schooling, will be aided by a child insurance plan.
One life insurance policy that offers financial stability and aids in wealth growth after retirement is retirement plans. Depending on the annuity option selected, these plans will pay you a certain amount as a pension in the vesting tenure.
What is Saral Jeevan Bima?
Saral Jeevan Bima is a type of term life insurance plan which is popular in India. This product is made available to everyone without regard to their residence location, level of education, or line of work. This term plan is accessible to buyers of all income levels and educational backgrounds. When the policyholder passes away within the term of the plan, this insurance policy pays a lump sum settlement of a specified amount (sum insured) to the designated nominee. It is a fundamental life insurance strategy that gives your family stability financially. Saral Jeevan Bima’s terms, conditions, and coverages for all life insurance providers are the same.
Why should I buy Life Insurance?
Here is a list of all the benefits offered by life insurance plans, which makes it a necessity for every household:
- Peace of Mind: As the sole breadwinner of your family, you must make sure your dependents are financially stable. With a proper life insurance plan in place, you can rest easy knowing that your family members and other dependents will have a financial safety net in case something unfortunate happens to you. The death benefit can act as a replacement for your income for the upcoming days, helping them maintain their daily regimen and pay for your kid’s education or marriage.
- Saving Instrument : The policyholder can save money with a life insurance plan, which is its second significant advantage. The insured can gradually accumulate money while still receiving life insurance coverage thanks to endowment life insurance, ULIP life insurance, child insurance, and retirement insurance.
- Affordable : Life insurance is a wise investment that can help you cover the cost of your funeral expenses and provide financial relief in case of death. In India, life insurance is available at affordable rates. With minimal monthly premiums, you can get a moderate-sized life insurance plan which offers financial backup to your family in case something happens to you.
- Tax Advantages : You may deduct the cost of life insurance premiums for yourself, your spouse, or your kids from your annual taxable income. Under Section 80(C), you are eligible for a maximum tax deduction of Rs. 1.5 lakh. Section 10(10D) of the IT Act 1961 applies to the tax-free settlement of returns from life insurance policies.
What are the life insurance add-ons?
Add-ons or riders are an important component of insurance coverage. It enhances the base coverage of a plan in exchange for an additional premium amount. Here are the 4 most common add-ons to life insurance policies in India.
1. Comprehensive Accident:
This add-on offers you a payout if you face death or dismemberment due to an accident.
2. Premium Waiver :
This add-on offers you a period of waived premium payments if you face dismemberment or disability.
3. Accelerated Critical Illness :
This add-on provides you with periodical or lump sum payments if you are diagnosed with any kind of critical illness listed in the policy.
4. Life Stage Pay-out :
This rider enables you to subsequently enhance the coverage level in accordance with the terms and conditions of the insurance policy without providing any proof of insurability.
How to file a Life insurance claim?
Here is a step-by-step breakdown of the claim filing procedure for life insurance plans
- Get multiple copies of the policyholder’s death certificate
- Contact your insurance provider.
- Fill up necessary documents.
- Attach a certified photocopy of the funeral director’s signed death certificate with the insurance claim.
- You should get a payout soon after submitting the claim.
- Once the claim is approved, you need to decide how the payout will be made. You can choose from monthly and lump-sum payments.
Life Insurance Exclusions
Like every other insurance product in India, life insurance plans come with a set list of situations which are not covered under the policy. Here is a list of all the common exclusions of life insurance plans.
- Suicide
- Death from life-threatening activities
- Death from illegal activities
- Pre-existing health conditions that are not covered
The Bottom Line
The greatest factor in choosing the best plan is your health. With this in mind, you should research and compare many different plans to find the one most aligned with your needs. Incorporate what you have learned from previous medical care, family history, age etc. Make sure that you take these into consideration before making a final decision.
Frequently Asked Questions
There is no ‘best’ term insurance for spouses, you need to do proper research and purchase a policy which meets your requirements and budget appropriately.
The premium is a sum that the policyholder pays to the insurance company monthly or annually.
Suicide is generally not covered under any whole life insurance policy. However, some companies offer suicide coverage after a small waiting period. This period can vary somewhere between 1 to 3 years, depending on the policy terms.
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There is uncertainty at every step of the way in our lives. Now more than ever, Life insurance is a need. We have been able to cope and manage the stressors of life in various ways, and one of them is having a back up plan. You need a back up plan for your life as well, to ensure that the people you leave behind are cared for and safe. Life insurance policies provide full proof insurance of financial support in case of sudden demise of family members. Life insurance proves to be a safety net to save you from the hit your family and loved ones might take in case of death or disability of a family member. Life insurance not only covers the above stated, but also unforeseen circumstances like critical illness or permanent disability. When you’re insured you are assured that there will always be a shoulder to support your family, and that will be your insurer! There are few things life insurance helps us achieve, that is, protection of the family, investment for your future financial goals and most of all savings for your retirement plans and more. What is life insurance? It is a legally binding contract that promises benefit to the policy owner in case the insured person dies. The beneficiaries of the life insurance policy get the benefit, the insured sum, subsequent to the death of the person insured. It is structurally pretty easy to get a hold of. There is an assured amount that you pay to your insurer , a minimum basic amount you pay to get your life insurance policy started off. Now on that you pay the premium monthly or quarterly or annually depending on the type of insurance you have opted for. However there are some contingencies to keep in mind so that you know what you’re getting into. Firstly, life insurance depends on a few factors like age, gender, smoking habits, and the policy term. All of these factors your insurance premium amount varies according to the plausibility and probability of any unfortunate event happening. At the very basics, life insurance can be specified into two main classifications- term life insurance and whole life insurance. Apart from those two categories there are also- endowment plans, unit linked insurance plans, child plans, pension plans. Term insurance It is an insurance policy designed to last a certain number of years and then come to term and end. Usually the common terms are 10 years or 20 or 30 years. Term life insurance is a great tool to improve your financial stability as it gives a return at the end of the tenure. There are different types of term insurance as well. Increasing term life insurance helps your insurance as well as premium amount grow and is a great tool for investment purposes. Level term stays constant throughout the term, including your premium as well as assured amount Decreasing terms makes assured amounts of money decrease over time however the premium you pay remains constant. Whole life insurance This is probably the best policy to go for if you’re looking for the actual purpose of life insurance, meaning safety and coverage of your loved ones financial stability after you. You are required to pay the premium throughout your life starting at the time you started the policy. There are a few types of whole insurance as well ULIPs : These are different from the traditional whole life insurance but useful nonetheless, the premium amount you pay throughout your life is used for two things within this policy, mainly: firstly your savings and secondly investment in the market for the amount to grow. The traditional plan: when your policy reaches the end, you get its promised benefits These plans can be further divided into non-participating and participating categories. In the former case, the insured does not get any bonuses or dividends from the corporation. Benefits can be taken in one lump sum or as recurring payments. Endowment policy Within this plan if the insured person lives through the maturity period they get an added bonus or benefit. Just like the whole life insurance policies they can also be participating and non participating but here in you can get the benefits of investment in the market like ULIPs Money back policy This is probably on the more expensive side, however still absolutely worth is as the beneficiaries get the exact amount that you have invested in the policy Child care policies You can think of this policy like a safety net for your child. It helps you save for the future and provides the usual coverage, however they can be like endowment plans or UILPs the added advantage is that there is no bar on the age limit RETIREMENT PLANS This plan is , as the name suggests, a retirement plan. In such an economy and with the financial uncertainty we live with, it is only a valid concern that our old age shall be comfortable years to live through. These plans somewhat work like a pension, the policies you have invested in, their benefits you reap as monthly payouts to you after your retirement. These benefits can also be transferred to the nominee of your policy.
...We are always a bit unsure of what to invest in and what not to invest in, or how to go about doing exactly that. Credit this factor to the lack of awareness and knowledge or general uncertainty, irrespective, we are here to provide you with a clear view of how to manage such a situation, and how to go about choosing and investing in your very own life insurance policy. There are multiple coverage options for life insurance and choosing the right one for you is a task, come lets make it easier for you! But first let us look at what are the benefits of investing in an insurance policy. Since we already know life insurance policy is a great tool for investment, not only because it provides a range of options where you can choose what to do with your investec money, but also that it’s a burden off your shoulder once you’ve opted for it. They provide you with the financial coverage if you go through a terminal illness Since they’re long term you do not have to worry about choosing what to invest in constantly so you can live your precious years worry free. They obviously act as a money doubling strategy where as you grow your money grows with you. As the name suggests, not only you but your loved one reap the benefits later on as these plans reach maturity. Life policies are not taxable, so you get tax free financial returns and benefit These policies make up for lost time and income and provide help with end of life care. Now we have made it pretty clear why investing in a life insurance plan is logically and financially the wisest decision you can make. But these benefits only reach you once you decide and with a little leap of faith- and money. Step 1 Your first step should be to research the ideal insurance company you want to go for. Policywings provides an overview on the types of insurance policies as well, once you have a clearer picture of what kind of benefits you want to reap based on your age and number of members in the family, we move on to the next step. Step 2 Platforms like Policywings and policybazaar give you a clear picture with respect to various companies and their insurances, of different coverage amounts. Usually life insurance company have a detailed description of how your investment plan will work, and what percentage of the money you invest will reap you what percentage of benefits. Now choosing the right option is your decision to make. Step 3 A comparative analysis of the life insurance policy is essential, such platforms will also do that for you. It will give you a comparative analysis and all you have to do is look at other companies’ plans, and decide. Not just life insurance policy but life advice- keep your options open! Step 4 Now once you have chosen for a specific plan, you can go ahead and put all the necessary information the company asks you, birth date, gender, contact, nominee names and details, beneficiary names and details, aadhar details etc. Step 5 Lastly you make the payment online through net banking or whatever payment method you choose. Consequently you will receive the policy document on your registered email address. This document is extremely essential so keep it safe! Alternatively, there are other methods to go about buying a life insurance policy like you can go about it through a policy agent, or most banks offer life insurance policies as well, so talk to your banker just in case you discover new developments or improved plans. Always make sure to be thoroughly decisive and don’t be afraid to reach out to the company’s customer service providers in case you find yourself at an impasse.
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