Life insurance policy provides you with the assurance that your family will get financial security and support even when you are not around. The goal of the life insurance policy is to offer a measure of financial security to the family after your death. With a population of over one billion, only 35 million people in India are covered with life assurance policies. Undoubtedly, ignorance about insurance, lack of knowledge about facilities and high cost of insurance - are some of the reasons behind the low penetration of insurance.
Today, there are various life insurance companies in the market, offering a diversified range of insurance policies to cater divergent needs. It is necessary to compare life insurance policies offered by different companies, including their contract terms, premium quotes, limitations and benefits in order to ensure that you choose the best life insurance policy.
Life insurance is an agreement between you (the insured) and the life insurance company (the insurer). Under the terms of the policy, the insurer promises to pay a certain sum to the person (your beneficiary) upon your death, in exchange of premium payments.
Below are the basic types of life insurance policies. All other insurance policies are built around these insurance policies.
Term insurance plans provide insurance to an individual for a specified period of time. In such a policy, a fixed sum of money, called sum assured, is paid to the beneficiary of the insured, if the policyholder expires within the policy tenure. For instance, if a person has bought Rs 5 lakh term insurance plan for 20 years, his family is entitled to receive Rs 5 lakh if he dies within 20 years time span. However, if the policyholder survives the specified time period, then all paid premiums are not returned back. Apart from the tax benefits, these term insurance policies are designed to give 100% risk cover and hence they do not include any additional charges. As a result, it is considered as a pure and cheapest form of insurance.
This policy is mainly designed to create an estate for the heirs of policyholders as the plan offers sum assured plus bonuses on the death of the insured. Under this policy, the policyholder pays premium until his death, upon which the insurer pays the corpus to the beneficiary. The whole life policy doesn’t expire till the time any unfortunate event happens with the policyholder. It is feasible to combine whole life policies with other insurance products to address diversified needs like retirement planning, etc.
These are also referred as the traditional policies. An endowment policy is the combination of both insurance and investment. The life of the person taking the plan is insured for a certain amount, which is called sum assured. If during the policy term, the insured dies then all benefits will be paid to beneficiary. Also, if there is a bonus or guaranteed returns, then that will also be paid to the beneficiary. However, if the person survives throughout the policy term, then at the time of maturity, the insured will get sum assured alongwith the interim bonus. The premiums paid and bonuses accumulated through endowment policies are exempted from tax.
Money back insurance policy is a type of insurance plan under which life coverage is given during the term of the policy and maturity benefits are paid in installments to the insured. However, if the insured dies during the term of the policy, then death benefits would be paid to the beneficiary and money back insurance policy would be terminated on an immediate basis.
Unit linked insurance plans (ULIPs) are the market linked insurance plans that offer both life cover and wealth creation options. A part of the amount that people invest in ULIP goes towards offering life cover, while the rest is invested in the equity and debts. In this way, you get an opportunity to derive good returns as well. So, it serves both as an insurance policy and investment plan. ULIPs can be useful for achieving different long term financial goals like child’s education, retirement, etc. ULIP is considered as one of the best life insurance options for people who have no inhibitions from taking risks.
These policies are specially meant to provide steady income to an individual after retirement. A typical retirement plan has two stages- The first is the accumulation phase during which you pay premium and the money is accumulated throughout the tenure of the policy. Then the accumulated amount is invested in different securities approved by IRDA. These insurance plans are mainly designed to protect your principal amount, while at the same time, it offers steady income. The accumulation amount is followed by the vesting age, which is the age when you will start getting payouts. The vesting age is decided by the insured and in most of the cases; it is between 40-70 years. Indeed, retirement plan is the best insurance plan to maintain a steady lifestyle post retirement.
These plans help you to save money and also provide an investment opportunity to grow your money.
As the term itself suggests, these types of policies are meant for children. The basic motive of these policies is to provide financial assistance and meet the increasing educational and other needs of a child.
Term Life Protection Plan
Term life plan protects your family from any contingency for a specific tenure. As the premium rates are low, therefore, it is considered as a pocket-friendly protection plan. However, if the insured survives the tenure, the insurer doesn’t pay any maturity benefit.
It is the sum assured given to an individual after the death of a policyholder. This coverage depends upon many factors like age of the insured, coverage of the policy and the policy opted by an individual. The risk also decides life coverage of an insurance policy.
There are various terms used in an insurance contract. Below are some of the popular terms:
An insurance provider can challenge the validity of your insurance claim if genuine and proper information is not provided to them. They have the right to cancel your insurance policy and return your premiums.
This provision is the clause under which insurance company will not settle any claim if insured commits a suicide or even makes suicide attempt.
The reinstatement clause becomes useful when your policy lapses in the event of non-payment of the premiums. It states that policy can be revived again after paying outstanding premium along with late fees or interest but an insured must declare and prove themselves fit in order to be eligible for this provision.
This clause states that you will collect your settlement as per the options provided by the insurance company.
There can be few exclusions depending upon the policy, like cover is not provided in situations of war and aviation accident.
A grace period is provided to an individual when he/she is unable to pay premium within stipulated time. In other words, the time period for payment of the premium is extended.
These claims are differentiated into two different forms as below:
Death claims are made by nominees in the event of death of the insured. To initiate the death claim policy, few formalities need to be provided to the insurance company, like policyholder's death certificate, original policy contract, a duly filled claim form and proof of identity of the beneficiary.
Maturity claims are made by the individual when policy term gets completed and to avail this benefit insured has to furbish original policy bond and duly filled maturity claim form.
One of the key catalyst reason for buying insurance is tax saving. In India, tax rebate is provided to an individual for the sum invested in insurance policies. The amount invested in life cover is eligible for tax exemption under Section 80C of the Insurance Act.
If you too are looking for a good life policy but do not have a idea about which insurance company to choose and what type of policy is apt for you, PolicyBazaar can be a great help. We offer details of the leading life insurers in India. You can even compare different life protection policies online to see which policy suits you the most. You can also enroll for a policy and pay the premium for the policy online. Furthermore, with PolicyBazaar, getting life insurance quotes online from different insurance companies is no more remain a daunting task.
Over the last few years life insurance premium prices have been sloshed drastically. Isn’t that a real motivation to get covered? To learn more about the premium for the bestselling products, log on to PolicyBazaar.com and get life cover quotes from all the top insurers. So get 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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