Importance of Life Insurance
The value of life is best realised when we imagine the future of our loved ones without us. All of us have had this dread of leaving the people who we always protected and cared for, alone in this rather cruel world. But no matter how much endearing is the idea of spending our lives with our loved ones, we can never know when life takes an ugly turn. Life isn't assured, but it can definitely be insured.
Quoting V Manickam, Secretary, Life Insurance Council, ", "As part of Indian culture, our elders have always stressed on doing the most essential things first and then opt to carry on with other things. This is an integral part of the day to day conversations. "Sabse Pehle Life Insurance" comes from this very cultural nuance and will help establish an understanding of the essentiality of life insurance in our lives and the need to treat it as a topmost priority while planning for life."
Speaking of culture, saving money has been an integral part of the culture of India. Be it saving by investing in gold, or the day-to-day saving of non-financial assets by women of the household, Indian culture has always stressed upon the need for saving to deal with eventualities.
Life insurance is not only a safeguard measure against unfortunate incidents but also a great financial tool for saving. It is one of the simplest and safest financial instruments and thus has to become the centre of financial planning of individuals as well as households.
Life Insurance thus serves a dual purpose – It is a saving as well an excellent investment. Not only this, it comes with perks like tax benefits, easy loans on the lower rate of interests, affordable premiums, encouraging thrift.
Life insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against. Among other things, the contract also provides for the payment of premium periodically to the Corporation by the policyholder. Life insurance is universally acknowledged to be an institution, which eliminates 'risk', substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of the death of the breadwinner.
The contract is valid for payment of the insured amount during:
- The date of maturity, or
- Specified dates at periodic intervals, or
- Unfortunate death, if it occurs earlier.
- Security: Life insurance secures the lives of the dependants of the breadwinner of a household. It allows the person taking the insurance to choose his/her nominees, ensuring that the needy get the money, even after the death of the policyholder.
- Protection: Life insurance guarantees a certain amount to be paid at the untimely demise of the insured, irrespective of the amount saved so far. This investment is unlike other saving schemes where you only deposit the amount and get suitable interest on it.
- No-Risk: Life insurance doesn’t have market risks as opposed to other investment plans. Also, all the terms and conditions of the policy are clear to the buyer at the time of taking the insurance. This transparency minimises the risk of frauds or forgery.
- Planning Goals: Life insurance helps you to plan your future goals like higher education, loans, marriage, debt etc. and makes you financially sound to achieve them. There are also policies, which come with retirement plans and purchase of a house.
- Low Premium: Life insurance secures yours and your loved ones’ future without having you compromise on your present. The amount of premium may be as small as Rs. 100 and thus, doesn’t burn a hole in your pocket.
- Tax reliefs: The amount paid in premiums is exempted from income tax and wealth tax as it is eligible for tax deduction under Section 80C up to a limit of Rs.1.5 lakh. Assessees can also avail of provisions in the law for tax relief. In such cases the assured in effect pays a lower premium for insurance than otherwise.
- Loans: Life insurance is acceptable as security for most of the loans, including commercial ones.
Many kinds of life insurance are available in India:
- Term Life Insurance Plans: As its name indicates, it is an assurance for a term. If the insured person dies during the selected term, the insurer pays the sum assured to the nominee. It is low-cost and covers your financial liabilities. There may be further convertible term life insurance, increasing term life insurance, mortgage term life insurance or annual renewable term insurance.
- Whole Life Insurance Plans: When the term of insurance extends to cover whole life, i.e. until the death of the life assured (or 99 years), it is known as whole life insurance.
- Endowment Insurance Plans: Endowment policy comes with the benefit that the policyholder will receive a lump sum amount in case if he survives until the date of maturity. Rest details are similar to Term Life Insurance Plans.
- Unit Linked Insurance Plans: ULIP is a life insurance product, which provides risk cover for the policyholder along with investment options to invest in any number of qualified investments such as stocks, bonds or mutual funds. As a single integrated plan, the investment part and the protection part can be managed according to specific needs and choices.
- Child Insurance Plans: Child insurance plans are meant for securing one's child's future at an early age utilising an insurance plan that pays back at the time of need for child's education, marriage or other investments.
- Money-Back Plans: In money back plan, the insured person gets a percentage of sum assured at regular intervals, instead of getting the lump sum amount at the end of the term. This policy is suitable for risk-averse individuals who wish to save through an insurance plan and also maintain liquidity throughout. In case of death of the insured person, the nominee gets the entire sum assured, and the survival benefits are not deducted.
- Pension Plans/Annuity Plans: These policies are useful for old-age provisions. These cover the risk of living longer than the term for which a plan is taken. With the ageing of the population, these are now becoming popular.
Many policy plans are a combination of one or more aforementioned insurance plans.
How to Select Life Insurance
How to select life insurance using cover360.in?
It’s just a click away. Visit our website’s Term insurance section and fill in few details regarding your age, income, cover needed and whoa! You get a list of insurance policy from an array of insurers. Not just this, you can customise your coverage, period, Pay-type, Payout, and pay frequency as per your needs.
You can compare, analyse and buy a policy here and then, hassle-free! Still confused, you can call us on 97167-20000 or even contact us using WhatsApp! Our executives will help you choose your life insurance plan!
You can also check out our blog section to get a more nuanced view of insurance plans available and the ones you should go for.
The details we ask for are necessary:
- Your name and gender: Of course!
- Your contact: So that we can reach out to you!
- Your Age: The age at which you're taking a policy is the critical factor determining your premium. The earlier you buy, the lower the premium.
- Whether you smoke: Smoking is considered to be very risky, and the policy premiums for smokers are higher than non-smokers.
- The coverage you want: This is the amount you wish to receive in case of any eventuality. You can edit this later while checking out the list of plans.
- Your annual income: So that we can hand-pick the best options for you.
Any person who has attained majority and is eligible to enter into a valid contract can insure himself/herself and those in whom he/she has an insurable interest.
Policies can also be taken, subject to certain conditions, on the life of one's spouse or children. At the same time, the Corporation considers underwriting proposals, certain factors such as the policyholder's state of health, the proponent's income and other relevant factors.
- The Earlier, The Better: Your age is one of the primary factors affecting your premium. The earlier you buy your policy, the lesser premium you pay. Typically, the premium amount increases average about 8% to 10% for every year of age; it can be as low as 5% annually if your 40s, and as high as 12% annually if you're over age 50. Age also affects your medical condition and thus increases the risk. Higher risk also leads to higher rates of premium. However, it is never too late to buy a policy.
- Which insurance do you need? If you are a beginner in your life, you have fewer responsibilities, and you can afford to save and invest a part of your income. In this case, choosing a policy which helps you to create wealth will be wiser. However, if you already have dependents, you should opt for securing their future and choose a plan accordingly. You may also think about taking a child insurance plan, and s/he will never have to worry about his/her education or career. In a later age, taking retirement plans will help you and your spouse deal with old age free of financial tensions. Apart from this, things like occupational hazards should also be taken into consideration.
- Disclose honestly: You should honestly disclose your income, medical condition etc. to the insurance company. An insurance company is not legally obligated to honour your policy and pay claims if you knowingly misrepresented the truth on your application. Telling the truth will only help you get the benefits of your policy at the right time.
- You can renew or extend or change: As your policy expires, you will stop paying the monthly premium. However, if you want to, you can extend the same policy within the grace period of 15 days by paying an annual premium on it. The premium rates may increase in this case. Most term insurance policies come with an option of conversion where you can convert your term life insurance plan to a whole life term plan or an endowment plan. You get a lump sum amount on maturity of the policy.
- Choosing Riders: A policy rider in an insurance policy represents a provision or modification to an existing insurance policy that provides additional coverage to an insurance policy. Riders on the insurance contract provide extra protection against risk. If one has a family history of critical illness, one must choose a critical illness rider. If one travels a lot, an accidental benefit rider may be selected.
- Tax saving: Premiums paid toward all life insurance policies are eligible for tax benefits under Section 80C. This deduction can be claimed for premiums paid towards insuring self, spouse, dependent children and any member of Hindu Undivided Family. An important point to be noted is that if the policy is issued on or before March 31, 2012, annual premium up to a maximum of 20% of the sum assured becomes tax-deductible. For insurance policies issued on or after April 1, 2012, annual premium up to a maximum of 10% of the sum assured is tax-deductible.
- Consider Claim Settlement Ratio of a company: Higher the death claim settlement ratio; the greater are the chances of the settlement of a claim by the insurer. Therefore, a higher death claim ratio is considered a good indicator for a life insurance company.
- Premium: The payment you make to a Life Insurance company to ensure you stay protected is called a premium. It may be monthly or yearly.
- Maturity: If all the premiums under the policy are paid, the policy matures for payment on the date of maturity.
- Claim: An insurance claim is a formal request by a policyholder to an insurance company for coverage or compensation for a covered loss or policy event.
- Indemnity: An Indemnity Contract is one where one party promises to save the other from the loss caused to him by the conduct of himself, or by the conduct of any other person. Insurance contracts are not contracts of indemnity, but the principle of indemnity applies to insurance contracts, except to life and accident insurance contracts.
- Nominee and nomination: A person holding a policy on his own life can nominate a person to receive the policy sums of money in case of policyholder's death during the term of the policy. Under Section 39 of the Insurance Act, who can give a valid discharge for the claim amount, if the life assured dies before the term of the policy expires. If the nominee is a minor, appointee may be appointed to receive policy sums of money.
- Riders: There is a special policy provision or a group of provisions that can be added to a policy to expand or limit the benefits otherwise payable.
- Cash Value: The cash value of a Life Insurance policy is the accumulated amount that is given to the policy owner upon cancellation of the policy.
- Underwriting: Underwriting is the process of classifying applicants and evaluating risks for insurance by identifying such characteristics as age, gender, health, occupation, and lifestyle or hobbies.
- Utmost good faith: It is a common law principle (sometimes called Uberrimae Fidei). The principle means that every person who enters a contract of insurance has a legal obligation to act with utmost good faith towards the company offering the coverage and disclose, accurately and fully, all facts material to the risk being proposed, whether requested or not.
- With-profit and Without Profit Policies: An insurance policy can be 'with' or 'without' profit. In the former, bonuses disclosed, if any, after periodical valuations, are allotted to the policy and are payable along with the contracted amount. In 'without' profit plan, the contracted amount is paid without any addition. The premium rate charged for a 'with' profit policy is, therefore, higher than for a 'without' profit policy.
- Guaranteed and Non-guaranteed policies: A guaranteed policy comes with the guarantee that you will have to pay a fixed premium for the entire term, and the policy cannot be terminated by the company mid-term. In non-guaranteed policy, dependent on the performances of the investments, therefore, the rate is assumed in the policy benefit illustration.
- Participating and non-participating policy: A participating policy enables you as a policyholder to share the profits of the insurance company. These profits are shared in the form of bonuses or dividends. In non-participating plans, the benefits are not shared, and no dividends are paid to the policyholders.
- Endowment Plans: Endowment Type Policies are issued for a fixed term, usually not going beyond 70 years of the life assured. The sum assured is payable on completion of the selected terms (called maturity) or death, if earlier. These are the most popular forms of insurance in India. A variation of this policy is moneyback, where a partial sum is paid periodically, called survival benefits. On maturity, the balance sum assured is paid. Death cover is, however full.
- Joint Life Insurance: It is a type of policy both partners are the owners as well as the beneficiaries of the policy. So, in case something happens to one of them, the partner will receive the life coverage benefit.
- With-profit and Without Profit Policies: An insurance policy can be 'with' or 'without' profit. In the former, bonuses disclosed, if any, after periodical valuations are allotted to the policy and are payable along with the contracted amount. In 'without' profit plan, the contracted amount is paid without any addition. The premium rate charged for a 'with' profit policy is, therefore, higher than for a 'without' profit policy.
- Guaranteed and Non-guaranteed policies: A guaranteed policy comes with the guarantee that you will have to pay a fixed premium for the entire term, and the policy cannot be terminated by the company mid-term. In non-guaranteed policy, dependent on the performances of the investments, therefore, the rate is assumed in the policy benefit illustration.
- Participating and non-participating policy: A participating policy enables you as a policyholder to share the profits of the insurance company. These profits are shared in the form of bonuses or dividends. In non-participating plans, the profits are not shared, and no dividends are paid to the policyholders.
- Endowment Plans: Endowment Type Policies are issued for a fixed term, usually not going beyond 70 years of the life assured. The sum assured is payable on completion of the selected terms (called maturity) or death, if earlier. These are the most popular forms of insurance in India. A variation of this policy is moneyback, where a partial sum is paid periodically, called survival benefits. On maturity, the balance sum assured is paid. Death cover is, however full.
- Joint Life Insurance: It is a type of policy both partners are the owners as well as the beneficiaries of the policy. So, in case something happens to one of them, the partner will receive the life coverage benefit.
- Claim Settlement Ratio (CSR): It is the indicator (in percentage_) that shows how many claims an insurer has settled in any financial year. It is equal to the total number of death claims settled/paid during a fiscal year as a percentage of the total number of death claims against policies received during the year by the insurer.
Claim Process
As soon as any eventuality occurs, the insurance company should be contacted. These days, it is also possible to file claims online. The company generally demands some documents to support your claim. There are typically two types of claims – maturity claims and death claims. Maturity claims are made when the period of your insurance is over while death claims are made in case of the death of the insured.
Most of the companies will send a maturity letter much before the completion of the period of the plan. On the date of maturity, the life insured is required to submit the maturity claim discharge form with the original policy bond. It is advisable to send these much before the maturity date to enable timely settlement of the claim.
The company will issue cheques or transfer electronically on the maturity date.
In the case of death claim, you will need to give the following details to the company:
- The claimant's statement
- Policy number
- Date, cause and place of death
You have to attach the following documents with the claim intimation form:
- Original policy document
- Original death certificate
- A police FIR and post-mortem exam report (for accidental death)
- Certificate and records from the doctor/hospital (for death due to illness)
- Advance discharge form for claim processing
Some companies may ask for some additional documents like a certificate from employer or some other supporting documents.
As soon as the company settles the claims process, which generally takes 7-10 days, the death/rider benefit is released.
FAQs
Write your thoughts here...
First, decide on what are your needs. Do you need a policy for taking care of your children who will eventually become independent? Go ahead with term insurance. Do you have permanent dependants? Whole life insurance will suit you the best. Also, consider your income and the premium you can afford. You should check the various plans available with the insurance companies.
Alternatively, you can visit our website, and we will conduct the research for you.
Depends on your income and life goals. One rule of the thumb is that "An earning individual up to the age of 40 should purchase a term plan with a life cover of approximately 20 times the annual income, a person in his 40s should buy a cover 10-20 times, and an individual in his 50s should opt for a life cover of 5-10 times the annual income. The term insurance plan should continue until retirement age". However, the needs of every individual and family are unique. You should always figure the number of dependents, the number of years they will need financial support, inflation and your debts and liabilities while deciding on your insurance cover.
These days most companies offer a variety of payment methods like cash, credit or debit card payments, online wallets, internet banking, and so on. You should always check with your insurance company about the premium payment options they provide.
With so many companies and plans in the market, one can easily get confused over what to buy. Cover360 not only has the directory of the best policies available, but it also has the filters that help remove the clutter. Also, cover360 provides easy to understand product descriptions with all the details incorporated and complete support right from selecting a policy to filing a claim.
Many companies provide an option to change your cover with changing income. However, your premium will also vary accordingly. Term insurance can be renewed or upgraded. It is advisable to consult the company and confirm beforehand.
If you cancel a policy during the free-look period which is generally 15 days from the date of buying insurance, you can get a refund of the payments you've made. If you have a term-life policy, you won't get any refund or cash if you cancel your policy after a free-look period or let it lapse. Whole life policies with cash value may provide some cash when cancelled.
If you are unable to pay your premium on the date it is due; you enter the grace period. The grace period is generally a period of 15 days from the due date; you must pay your premium within the grace period.
In case you do not pay your premium even during the grace period, your policy lapses,
Here are a few quick tips:
- Always buy from a licenced insurance company
- Never hide your information
- Read the policy documents carefully
- Keep reviewing your policy regularly
- Keep in mind your liabilities, responsibilities and inflation while deciding the cover amount
At cover 360, you get a more extensive range of policies and plans. We have efficient, smooth and secure payment gateways to make easy and safe online payments on just a few clicks. As no agents or brokers are involved, there are lesser risks involved. It also saves your precious time and money as there are no physical visits required.
There are special units in Life Insurance Companies that evaluate the risks, known as Underwriters. An underwriter gauges the threat of your future claim and calculates the risk. However, no one can calculate the value of human life. Life insurance is just a financial shield against such mishaps.
Some types of life insurance can readily be cashed in before death for the accrued cash value. If you need the money and you have a life insurance policy with a cash value, there are ways to get the cash from the policy without the insured person passing away. Alternatively, you can take a loan keeping your insurance policy as collateral.
If one commits the suicide within 12 months of buying the policy, the policy will pay the family (whosoever is the nominee) the death benefit (the sum assured). After this period, suicides are generally covered.
The policyholder may not receive any money from the insurance company upon maturity in case he survives the policy term. However, some insurance companies offer a term policy with a return of premium amount or the sum assured upon maturity. Some companies also offer plans along with bonus or profits and policyholder upon surviving the term of the policy would receive the sum assured along with the accumulated bonus.
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