Life insurance is a safe and secured way to protect your loved ones after your demise. When you decide to buy a life insurance policy in India, you enter into an agreement with the insurance company that assures to provide a certain sum to your family in case of your sudden death. The insurance company offers financial protection to your family so that they can continue to lead a stable life even in your absence. In return, you make periodic payments to the life insurance company, called premium. Here, your life cover premium depends upon various factors such as age, gender and health condition.
Besides offering financial protection to your family, life insurance policies offer the following benefits:-
• Certainty:- Once a goal has been set, life insurance policy is the best means to fund that goal. This is because it gives a peace of mind that in case of any unfortunate event such as death and critical illness; the sum assured paid by the life insurer will be sufficient to meet future goals of the policyholder or family.
• Tax benefits:- The maturity benefits offered by life insurance policies are eligible for tax benefits under Section 10(10D) of the Income Tax Act in India. Also, premiums paid on life insurance policy get tax deductions under Section 80Cof the Act.
• Encourages contribution:-Most often, life insurance policy is taken for a specified goal, such as child’s education and marriage. In this way, it discourages the person from utilizing those funds for any other motive. It is the best way to accomplish your goals.
The minute you have people dependent on you, you should buy an insurance cover. The younger the age, lower will be the premium. Anyone who is married and has a family to support should think of purchasing the best life insurance policy. Even single persons can choose the best life insurance plan to get tax benefits. Further, after marriage, they can add their spouse and children as beneficiary in the insurance contract.
Your life insurance needs depend on a various factors such as your marital status, age and gender. For instance, when you are young, you may not need a life insurance but as you grow old and your financial responsibilities get increased, you may need the best life insurance policy of high sum assured.
At the most basic level, the amount of life insurance that you need corresponds to your answers of the following questions:-
1. What are the immediate financial expenses that your family may require upon your immediate death?
2. How much of your salary goes towards meeting present expenses and future needs?
3. How long would your dependents need support in case of your sudden demise?
4. How much money would you like to save for your child’s education and marriage?
Below are the types of life insurance policies available in the market:-
1. Term Insurance - It is the simplest and cheapest form of insurance that is designed to offer financial protection for a specified tenure, say 15 or 20 years. Term insurance ensures that your family gets a large lump sum amount, i.e; sum assured after your death to lead a financially stable life. However, if you survive the term, the insurer pays nothing.
2. Endowment Policy:- It offers the dual benefit of insurance and investment. A certain part of the premium is allocated towards the sum assured, while the remaining portion of the premium gets invested in asset markets— equities and debt. It pays a lump sum amount after the specified duration or on the death of the policyholder, whichever is earlier. An endowment policy may declare bonus periodically, which is paid, either on maturity or on the death of the insured.
3. Unit Linked Insurance Product (ULIPs):- In ULIP, a portion of the premium goes towards providing the life cover, while the residual portion is invested in equities and debts. The investment portion in ULIP is subject to market volatility. Investing in ULIP inculcates regular saving habit in a person, which is imperative for the creation of wealth.
4. Money Back Life Insurance:- It offers periodical payment of partial survival benefits during the tenure of the policy as long as the policyholder is alive. In the event of death of the insured, the insurance company pays the full sum assured along with survival benefits.
5. Whole Life Insurance:-Offering the dual benefit of insurance and investment, whole life insurance plans offer insurance cover for the whole life of the person or up to 100 years whichever is earlier. Also the life insurance company calculates bonus on the sum assured, which is paid to the nominee after the death of the policyholder.
6. Child Insurance:- The increasing education cost is causing uneasiness among parents. Therefore, it is best to invest in a good child insurance plan to give secured life to your child even in your absence. A child life insurance plan offers a lump-sum amount to the beneficiary (i.e. child) on the death of the policyholder. Here, the policy doesn’t end. In this case, Life Insurance Company exempts all future premiums and pays the money to the child at specified intervals as planned out by the policyholder.
7. Retirement Insurance Policies:-Also called pension plans, these are offered by life insurance companies to help an individual build a retirement corpus. This money helps a person to lead a financially secured life even after retirement. In case of an unfortunate death of the policyholder, the nominee can either take a lump sum or receive a regular pension for the rest of the policy tenure.
It’s easy to get confused with life insurance jargons at the time of comparing insurance plans. Here we explain some of the common life insurance terms that you must be aware of:-
Premium:- An amount paid to the life insurance company to get an insurance cover is called premium. A single premium life policy cover will require you to pay the entire premium amount in one go, while the yearly premium life policy cover will require you to pay premiums every year for the number of years specified in the life insurance policy document.
Insurer and insured:- The person who is covered by an insurance policy is called insured. Further, the insurer is the life insurance company that issues the policy, such as ICICI Prudential Life Insurance Co., Bharti AXA Life Insurance Co., Max Life Insurance, SBI Life Insurance and Birla Sun Life.
Sum assured:- It is the amount that a life insurance company agrees to pay, excluding bonus. In other worlds, it is the guaranteed amount that you or your nominee will receive.
Bonus:-This is an additional amount given by a life insurer along with the sum assured either on maturity or death of the policyholder. However, only participating life insurance plans or plans ‘with profits’ are eligible to get bonus.
Maturity value:-It is the amount that a life insurance company pays on maturity of the life insurance policy. It includes both sum assured and bonus.
Rider:- It is an additional benefit attached to the primary insurance cover. It offers financial protection over and above the basic sum assured against an eventuality. Some of the most popular riders that can be attached with insurance plans are critical illness rider, disability rider and premium waiver rider.
Annuity:- It is the regular payment that an insurance company agrees to pay you after you cross the specified age. So, for instance, you cross the age mark of 55, the life insurer will pay you a monthly or quarterly return. It is called annuity.
Surrender Value:- If halfway the life insurance policy tenure, you decide to discontinue the life insurance policy and take whatever money is due to you, the life insurer pays an amount which is called surrender value.
Paid-up Value:-If you stop paying premiums but do not withdraw the money from your insurance policy, your life insurance policy earns paid-up value. Depending on the number of premium paid, the insurance company will reduce your sum assured considerably and pays the remaining amount at the end of the tenure.
Survival Benefit:- This is a fixed amount paid by a life insurance company at the end of a specified duration.
Whether you want to buy money back policy, whole life insurance or any other policy, take the following steps to find affordable life insurance plans in India:-
• Buy when you are young:- The cost of life insurance policy increases with your age. Therefore, it is always better to buy an appropriate life insurance policy when you are young and when your premium rates are low.
• Do your homework:- Every life insurance company deploys its own tools and calculators to choose the right coverage and tenure for your policy. However, it is imperative to carry out some basic research on your part to know what you want and how much premium you can afford. In this way, you can find the best life insurance policy.
• Avoid buying too many riders if you don’t understand them:- Though it is a good idea to buy riders, but if you don’t understand them fully, you should avoid them. Remember, riders come at an additional cost and their cost will be added to your life insurance premium. Therefore, it is good to first understand your requirements before shelling out extra money.
• Take the help of a trusted life insurance advisor:- While it may look trivial, it is important to take the help of a reliable life insurance advisor to find the right policy. Most individuals are incapacitated to take the right financial decision by themselves and therefore, need to hire a life insurance advisor.
• Compare life insurance policies:- Since there are various life insurance companies in India offering a gamut of insurance policies, you need to be sure that you have selected right life insurance plans. Either you can compare it by yourself or take the help of a life insurance advisor who will compare various life insurance policies on your behalf.
The number of internet users has increased considerably in India. As a result, more and more people are buying life insurance policies online. However, if you are yet to use the internet to buy the life insurance policy, here we are giving you some of the good reasons why you should buy life insurance policies online now.
• Low cost:- Online life insurance policies are cheaper than their offline counterparts. As you purchase life insurance policies directly from the insurer without any intermediary, the insurer saves money and passes on the benefit to the buyer. Thus, online life policies work out to be cheaper.
• Easy background check:- With rampant use of social media and other means, it becomes easy to check the reputation of the life insurance company online before buying any policy. While scouting for a life insurance cover online, you can read reviews of policyholders and can take a better decision based on this information.
• Hassle-free process:- From start to finish, the entire process is hassle-free. All queries regarding the life insurance cover and insurance plans are quickly resolved by customer service centres. Even mandatory documents such as identity and address proof can be scanned and sent to the life insurance company.
• Instant policy quotes:- Online platform allows you to easily compare different life insurance policies in India. You just need to key in the details, get your insurance quotes and compare premium. You can buy the best life insurance policy in a blink of an eye.
If you too are looking for some good life insurance plans, but do not have an idea about which Life insurance company to choose and what type of policy is apt for you, PolicyBazaar can be a great help. We offer details of leading life insurers and various life insurance policies in India, such as endowment life policy and whole life policy. You can even compare different life insurance policies online to see which policy suits you most. You can also enrol for a life policy and pay the premium for the policy online. Furthermore, with PolicyBazaar, getting life insurance policies quotes online from different life insurance companies is no more remain a daunting task.
Over the last few years the premium of life insurance plans has sloshed drastically. Isn’t that a real motivation to get covered? To buy the best life insurance plan, log on to PolicyBazaar and get quotes from life policies of all the top insurers. So get your life insured, all it takes is a few clicks of the mouse at our website.
Do we need to pay taxes for benefits provided under life insurance cover?
The agent should actually inform you about the taxable benefits included in your policy. And, generally the death benefits are not subjected to any income tax.
How to check cash value of life insurance policy?
Majorly, cash value of life insurance policy include the death benefit along with some amount of fund which can be used as saving or source for future premium payment.
How do health condition, age and sex affect the premium?
The older you get, the greater are the chances of sickness and demise. Talking about the sex, male are likely to pay more as the life existence of a woman is generally higher than that of a man. If you are suffering from poor health or pre-existence disease then you are expected to pay a higher premium. Health is actually counted before age and sex.
Can the insurer refuse to pay?
Till the time it is a genuine case, the insurer has no point to reject the case. In case of deceptive claim or disappearing of an individual under mysterious circumstances, the insurer can hold the payment for investigation results.
Is there any tax benefit?
You can have tax rebate on the policy under the Income Tax Section 80C. Also, the death benefit received as cover is not considered taxable income for the beneficiary. The cash value plans are generally not counted under the taxable section.
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