Life Insurance FAQ | How much life insurance do i need

Life Insurance FAQs

Are life insurance benefits taxable?

Death benefits are usually not subject to income tax. Your insurance representative should be able to tell you if your policy benefits will be taxable.

What is cash value of life insurance?

In addition to providing a death benefit, cash value of life insurance also accumulates a fund that can be used to pay future premiums or serve as a form of savings.

What is the importance of age, sex and health?

Growing age demands high premium because the older you get, the greater your chances of dying. Being male also costs more because females live longer on an average. Poor health raises the premium cost for life because it decreases the number of years you are likely to pay premiums and reduces the time before the company may have to pay a claim. Health is the most important factor, followed by age and sex.

Can a company refuse to pay a claim?

Generally, no, however occasionally there are unusual cases when someone disappears under mysterious circumstances or a fraudulent claim is suspected, where payment could be withheld until the investigation is clear.

What about Tax benefits?

Tax advantages associated with life insurance are death benefits are not taxable as income for income tax purposes for a person named as the beneficiary. The second tax advantage is that for cash value plans, there is generally no tax on the increase in the cash value as it grows over time. The premium paid also enjoys tax exemption subject to limits imposed under Section 80C.

What happens if I miss to pay my premium on time?

Generally a grace period of 30 days on life insurance policies is offered. After which the company may or may not allow you to continue the policy. Sometimes this may depend on whether you can provide evidence of good health. But if you are beyond the due date and grace period, you are at the insurance company’s mercy. And in such situations, if death occurs, the company is not liable for claim benefits.

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