Life Insurance

Life Insurance is the safest and the most secure way to protect your family or dependents against financial contingencies that may arise post the unfortunate event of your untimely demise. Under a Life Insurance Contract in India, the insurer assures to pay a definite sum to the policyholder's family on his demise during the policy term.

What is Life Insurance Policy?

Life Insurance policy is an agreement between an insurance company and a policyholder, under which the insurer guarantees to pay an assured some of the money to the nominated beneficiary in the unfortunate event of the policyholder's demise during the term of the life insurance plans. In exchange, the policyholder agrees to pay a predefined sum of money in form of premiums either on a regular basis or as a lump sum. If included in the contract, some other contingencies, such as the critical illness or the terminal illness can also trigger the payment of benefit. If mentioned in the contract, a policy may also cover some other costs like funeral expenses as a part of benefits.

Except for the death benefits, an online life insurance plan also provides maturity benefits. These benefits are provided in the form of a payout if the insured survives the entire term of the life insurance policy. Moreover, life insurance plans also offer several tax benefits under Section 80C of the Income Tax Act, 1961.

The insurance company will determine the premium payment that has to be made by the policyholder to the company. However, the claimant is given the option to choose the term of the policy and the sum assured. There are number of factors which are taken into consideration while determining the premium amount for every individual. The sum assured is amongst those factors. Higher the sum assured, higher the amount of the premium. 

Best Life Insurance Plans in India 2019

Why it is Important to Buy Life Insurance Policy?

It acts as a financial net in case of eventuality linked with human life, such as retirement, disability, accident, death, etc. Life is unpredictable; one can never guess what happens next. In case of sudden demise of the primary breadwinner of a family, apart from the emotional trauma, his/her family is at the risk of a financial crunch. In case this person is the sole breadwinner of the family, his/her dependents face a loss of income.

Though there is no premium calculator that can calculate the worth of a human life, what needs to be done must be done. To calculate the sum assured of a life insurance policy, the insurer takes your lifestyle and finances into consideration. This sum assured is provided to the insured's family after his/her demise in order to offer them a much-needed financial support. In order to make sure that one's family doesn't have to make any compromises due to financial crunches, one should buy a suitable life insurance plan.

• Unpredictability- Life is unpredictable. One can't predict when his/her life will come to an end. If it were up to people, nobody would want to leave without ensuring the financial security of his/her family. Sadly, it's not up to them. The solution is, one must buy life insurance plan and be a step ahead so that the financial goals set for his/her family can be accomplished even when he/she isn't around.
• Financial Cushion- It provides much-needed financial support to the insured's family by compensating for the loss of income.
• Debt-Proof Future- The sudden demise of a breadwinner is nothing short of a catastrophe. While it is an emotional crisis initially, it can get converted into a financial one in no time. With the help of life insurance, any outstanding debt, such as a motor loan, personal loan, a home loan, etc. can be taken care.
• The Accomplishment of Retirement Goals- While life insurance plan is a perfect option to accomplish long-term goals; it helps accomplish retirement goals as well. Some life insurance plans offer diverse investment opportunities and some insurance plans offer performance-based dividends.
• Tax Benefits- A policyholder can avail tax-benefits regardless of the type of life insurance policy he/she purchases. As per section 80 C of the income tax act, the premium paid towards the life insurance plan is eligible for tax benefits up to Rs. 1 lakh 50 thousand.
• Mental Peace- Life insurance plan offers much-needed peace of mind to the policyholder by assuring the financial future of his/her family. Even a basic life insurance plan helps to generate corpus to take care of the future financial needs of the insured's family.
• Savings Tool- In case a person opts for a traditional/unit-linked plan, he/she pays an enhanced insurance premium. This extra amount of money is invested in the insured's preferred fund and consequently acts as a savings tool.
• Children's Future Expenses- A life insurance plan takes care of all the future expenses of a policyholder's children, such as education and wedding expenses. These days, the cost of raising a child is sky-high. Not just that, even getting admission in a reputed college costs a bomb. This policy ensures that the policyholder's children don't have to make any compromises as far as their education and personal needs are concerned.
• Business Security- While some life insurance plans cater to the needs of the insured and his/her family, there are some insurance plans available in the market that offer support to the insured's business. It also enables a business partner to buy the share of his/her deceased business partner.

Once the insurance buyers know what they want, the next step is to shop around and compare life insurance plans that fulfill his/her requirement. The best insurance policy is the plan that adapts to insurance buyer's needs. This life insurance plan will help his/her family to sail through the tough times with grace.

Benefits of Life Insurance Plans

The perks of buying a life insurance policy go beyond protecting one's family in tough times. Undoubtedly, it is a necessity to safeguard one's dependents (in case of one's unfortunate and untimely demise, accidents or physical disabilities that lead to a loss of income), but there is a long list of other benefits, too, that makes the life insurance plan a lucrative choice among individuals.

Sadly, most people are not aware of the many benefits associated with it - all they care about, understandably, are the death and disability benefits. However, there is a long list of benefits attached to the life insurance policy such as maturity benefits, tax benefits etc. let's take a look at the benefits offered by life insurance plans.

Loan Against a Life Insurance Policy:

Till date, many people don't know that life insurance policies can also be used to secure a loan at a significantly more competitive rate as compared to other modes. One can get a loan from the same company or a bank or NBFC (Non-Banking Financial Company).

The maximum amount of loan an individual will be able to get depends upon the type and surrender value of his/her life insurance policy.

Generally, the loan amount is a percentage of the surrender value of the life indemnity policy and it can go up to as high as 80% to 90%. There are few companies that only allow loans amounting to 50 percent of the total premium amount paid by the policyholders to calculate the maximum loan amount they can be eligible for.

Online Payment Rebate

Most individuals have never heard about the online payment rebate benefit, but it's important to note that the payment mode chosen by an individual drastically affects the premium of a life insurance policy. In fact, an insurance company's servicing cost considerably goes down when an individual opts to pay his premiums online.

This is because there is no cost involved in paperwork in this case. Therefore, the life insurance company is able to save a significant amount on the commission, which is generally paid to the agents.

Varying from company to company, this rebate might have already been given to the policyholders before the online premium rates are quoted to them.

Refund on the Sum Assured

This benefit might surprise many customers, but there are many life insurance companies that offer rebates for a higher sum assured. This is because the servicing cost of all the policies belonging to the same category is almost the same; hence, a higher sum assured means a lower cost of servicing per unit of sum assured, for the life insurance company. Subsequently, this translates to higher returns or profits per unit of the sum assured/premium paid, which explains the rebate on the sum assured.

Rebate as per the Periodic Payment Chosen

Almost every life insurance company offers the periodic payment option to its customers which can be in the annual, half-yearly, quarterly or monthly mode.

In this case, the higher the frequency of payment one chooses, the higher the servicing cost will be (comprising of administrative, processing and collection costs) for the insurance company.

Furthermore, if a policyholder chooses to pay his premium at one go for the complete year, the company can use the available funds for investment purpose which automatically means more profits and benefits for the company.

This rebate is often already included in the premium rate offered by the life insurance company once a customer chooses the periodicity for the payment.

Taking Care of One's Business

There are some life insurance companies that provide an option, wherein if the policyholder owns a business then their business partners can purchase the  share of the policyholder without any hassles (after the policyholder's death). In this scenario, the business partner will simply have to enter into an agreement with the life insurance company and the pay-out received after selling the policyholder's share will be given to his dependents.

However, it's important to understand that the nominee or the dependents of the policyholders do not get a stake in the company.

Tax benefits

Under section 80C of the Income Tax Act 1961, any amount of life insurance premium paid by a policyholder is eligible for a tax rebate, irrespective of the fact if it's for oneself, their spouse or their children (premium paid for parents and in-laws is exempted).

The policyholder will get the tax rebate facility for all the premiums he is paying and this benefit is available with all the life insurance companies - be it from (the)private sector or (the)public. This benefit has been explained further below.

An individual can save taxes under Section 80C of the Income Tax Act, 1961. Under this section of the IT Act, the premiums paid towards the policy are eligible for tax deduction. What's more, the life insurance policies, which offer maturity benefits, also qualify for tax deductions on the maturity proceeds of the policy under Section 10 (10D) of the Income Tax Act, 1961.

Types of Life Insurance Policies

In order to offer the best coverage, life insurance policies come in two categories. The first is pure life insurance and the second one is a perfect blend of insurance & investment components.

In order to know what life insurance plan is suitable for an individual, it's important to know what types of life insurance policies are offered in the Indian insurance market.

Here are the details of aforementioned plans:

Term Insurance Plans

Term insurance is the most basic form of life insurance. It is affordable insurance that one can buy easily, without any hassles.

A term insurance plan offers a death cover for a stipulated time period. God forbid, in the event of the sudden demise of the insured during his/her policy tenure, the provider offers a pre-decided death benefit as a lump sum, or as a monthly or annual pay-out, or as combined benefits to the nominee. The best term plan offers comprehensive life cover at competitive premiums.

Benefits of Term Life Insurance Plans

• Death Benefit- The death benefit is paid as monthly payouts, a lump sum, or both.

Note- No payout is paid in case the insured outlives the policy duration.

• Additional Riders- In order to enhance the basic life insurance coverage depending on the expectations of the policyholder, term plans come with various optional riders.

Unit Linked Plans

A unit-linked insurance plan or ULIP is a type of life insurance plan. It is perfect blend of insurance & investment components. It comes with a long-term investment opportunity along with valuable investment flexibility. It offers combined coverage.

The premium paid towards a ULIP is partly used as a risk-cover for life insurance plan and the remainder is invested in market funds such as debts, equities, bonds, market funds, hybrid funds etc. The selection of the market funds depends purely on the risk appetite of the insurance buyer. The insurer invests the amount in the capital market as per the insured's preference.

Benefits of ULIPs

Here are the benefits of unit-linked plans.

• Best of Both Worlds- It offers the benefits of life insurance as well as investment.
• Ease of Investment- Based on the risk appetite, it offers various investment options for insurance buyers.
• Complete Autonomy- It offers complete autonomy of selecting the preferred investment option to the insurance buyers.

Endowment Plans

An endowment policy is a combination of life insurance and savings, which invests a particular amount in a life insurance cover and the remaining amount, is invested by the provider. In case the policyholder outlives the policy term, the insurance provider offers a maturity benefit to him/her. Furthermore, some life insurance endowment policies may offer bonuses on pre-specified periods. If applicable, the bonuses are paid either to the policyholder at the time of policy maturity or to the nominee in case of a death claim.

Endowment policies are also known as traditional life insurance policy. These plans come with an element of investment. As the risk involved is lower as compared to the risk factor of other investment products, the returns are lower as well.

Benefits of Endowment Plans

Here are the benefits of endowment plans.

Return on Investment- It acts as a long-term financial planning tool that offers returns on investment at the time of maturity.

Money Back Life Insurance Plans

This is a type of life insurance plan under which a stipulated percentage of the assured sum is paid back to the policyholder at pre-decided intervals. This payback benefit is known as a survival benefit.

Money back is the best type of life insurance policy for those who want their investments to be accompanied by an element of liquidity. Furthermore, these plans are eligible for bonuses as declared by the provider (if any).

Benefits of Money Back Plans

Here are the benefits of money back plans.

Short-Term Financial Goals- It acts as a tool to execute short-term financial plans and is a golden opportunity to earn a return on investment at the time of maturity.

Whole Life Insurance Plans

A whole life insurance plan offers life insurance coverage for as long as the insured lives. There are a few providers who offer life insurance coverage up to 100 years of age. Contrary to the coverage offered by term plans, this plan offers an extensive insurance cover.

The sum assured is computed when the life insurance plan is purchased and is payable to the nominee after the demise of the insured along with bonuses (if any). It is one of the best life insurance policies that offer coverage up to whole life for low premiums.

A variant of whole life insurance is available in the market that clubs the benefits with ULIPs. A whole life ULIP offers extensive coverage along with the benefit of high returns.

Note- In case the policyholder outlives the 100 years of age, the insurance provider pays the benefit of matured endowment coverage to the policyholder.

Benefits of Whole Life Insurance Plan

Here are the benefits of money back plans.

• Coverage - It offers lifelong insurance coverage to the policyholder.
• Partial Withdrawals - Upon the completion of the premium payment period, it offers the facility of partial withdrawals
• Age No Bar - It comes without an age limit with respect to the eligibility criteria.

Child Plans

A child plan acts as a tool to generate funds for the insured's child. A child plan helps one build a corpus especially for a child's education and wedding. Generally, child plans either provide installments on an annual basis or a 1-time payout once the insured child is 18 years of age. Child plan offers the best benefits.

In the unfortunate event of the untimely demise of the insured's parent during the policy term, immediate premium payment is payable by the insurer. In such cases, some insurance providers waive off future premiums but the plan continues till maturity.

Child Plan Benefits

Here are the benefits of child plans.

• Financial Support- Even if a child's parents have passed away, it ensures that the future of the insured child is safe and secure.
• Secured Future- It helps parents accumulate funds for a major event in a child's life such as education, wedding etc.

Retirement Plans

A retirement plan, also known as an annuity or pension plan, helps the insured accumulate a corpus for his/her retirement. Typically, retirement plans provide installments on an annual basis or a 1-time pay-out once insured is 60 years of age. The plan offers vesting benefit in case the insured outlives the policy term and a death benefit in case of the insured's demise.

Note- In case of the insured's demise while his/her policy is active, the life insurance companies pay a pre-decided amount to insured's nominee.

Retirement Plan Benefits

Here are the benefits of retirement plans.

• Corpus Generation- It helps the insured build a corpus for his/her retirement.
• Financial Independence-It offers much-needed financial independence to the insured.
• Long-Term Savings- It acts as a great tool for long-term savings.
• Retirement Goals-It helps to accomplish retirement goals with complete autonomy.
• Death Benefit- It offers death benefit which is either fund value or 105 percent of paid premiums.
• Vesting Benefit- The plan offers fund value as payout, which has to be utilized for purchasing.

Comparing the Types of Life Insurance Policy

Types of Life Insurance Riders & Their Importance

Choosing the right life insurance rider is as crucial as buying itself. After all, no one wants to regret a wrong decision. That's why; one must take time and expert's advice before buying a life insurance rider. Riders are add-on benefit offers by the life insurance policy which help in enhancing the base cover. However, without knowing the types of riders available in the market, one shouldn't randomly buy one for the sake of increasing the cover amount of the life insurance plan. In this regard, here are some of the rider options available for insurance seekers:

Accidental Death Benefit Rider

With this rider, in case of the accidental death of the insured, the nominee will receive the basic sum assured amount along with the additional accidental death benefit rider. In many cases, death do not occur on-the-spot, so most of the insurance companies set a period after the incident to extend the offered cover. Lets' say, if the policyholder dies after 100 days of the accident, the nominee still receives the sum assured. That's why, it is imperative to check the life insurance policy clause carefully at the time of buying a rider.

As eventualities come without prior notice, anybody can take this rider. However, it is a must buy for those who-

• Commute and travel by car, bike, public or commercial vehicles, on a daily basis.
• Someone who frequently does business trips or if the job involves physical work in a factory or on-site civil work

Accidental Total and Permanent Disability Rider

If the insured person is unable to earn a daily income due to the accident which leads to total temporary or permanent disability, this rider provides financial assistance to the family. In such unfortunate situations, the life insurance company bears the monthly income of the insured. The rider benefit may vary plan to plan and it is paid for a pre-decided time period. For instance, some companies offer rider benefits for 5 to 10 years from the occurrence of the accident. In case of the death of the insured during the policy term due to suffering, the beneficiary would receive the outstanding sum assured amount.

This rider is important to buy for the individuals who-

• Commutes and travel on daily basis by bike, car, public transport, train, or commercial vehicle.
• Someone who job involves physical work in on-site civil work or factories or does frequently business trips.

Critical Illness Rider

This rider benefit offered by life insurance plans covers major critical ailments like cancer, heart attack, kidney failure, stroke, coma, paralysis, etc. As the coverage may differ from insurer to insurer, it is important to check the list of illnesses included by the company.

The life insurance company offers the rider benefits on the detection of a critical illness. Though any of the above listed critical illnesses may not cause immediate death, the treatment could cost a bomb or could force the insured to leave the job. In such situation, the insured is compensated using this rider plan where the given money can be used in monthly expenses or in the treatment. However, the payout may vary as some insurer offers 100% of the basic sum assured and others don't. The only condition is that the life assured will have to survive a waiting period.

As no one can predict such an illness, this rider can be bought by anybody, especially

• Top-level officers with extreme work stress
• Chain-smokers
• Someone with unhealthy lifestyle

Waiver of Premium Rider

If the insured is unable to pay the premium due to any disability that leaves him/her with no income, the life insurance policy terminates. In such cases, the insured wouldn't be offered any compensation. Then, how will the family manage without an income?

In such a situation waiver of Premium rider is a savior, as all the future premiums of the life insurance policy will be waived off and the policy will be in force as before.

In case the premiums are not paid due to the death of the policyholder or accidental disability, the premium for the main policy and riders will be excused and the policy will continue.

Usually, this rider can be bought along with critical illness and accidental total and permanent disability rider. If not, the insured has to buy it separately. As uncertainties can't be predicted, one should consider buying this life insurance rider if they are a daily commuter or who works on on-site civil work and involves physical work.

Accelerated Death Benefit Rider

This rider works as a savior in case the policyholder is detected with a critical illness such as cancer, AIDS, leukemia, Ebola etc., which may shorten the lifespan of the insured. In such cases, the life insurance company pays a portion of the base sum assured in advance. This can be utilized for the treatment or for paying monthly expenses. The remaining money will be paid to the family on the death of the insured to secure their financial future.

Before taking any decision, a thorough analysis of lifestyle or surroundings is required. Based on this, insurance seekers should decide whether they need this rider or not.

Term Rider

This rider offers a monthly income or lump sum to the beneficiary in the event of the premature death of the insured. The benefit can be equal to the base sum assured which is pre-determined by the insurer.

Importance - Someone who wants to leave behind a huge death benefit.

Hospital Cash Rider

Under this, a fixed amount is paid in case of emergency/planned hospitalization. The benefit amount, terms and conditions, and sum assured may vary from insurer to insurer.

This rider benefit offered by life insurance plan is for those who want to cover expenses related to emergency hospitalization.

Surgical Care Rider

If the insured undergoes an unavoidable surgery in India, under this rider plan, a lump sum amount will be paid. However, the rider benefit may vary plan to plan or may vary from minor to major surgery.

This rider benefit can be purchased by anyone who wants to cover the expenses for surgery in case of any eventualities. This helps in mitigating any out-of-pocket expenses that may burn a hole in one's pocket.

Exclusions of a Life Insurance Policy

Though a life insurance policy offers you financial cover against multiple scenarios, there are certain situations in which your insurance company can decline your claim. It is recommended that you go through all the limitations as mentioned in the fine-print before signing-up.

Here's a quick rundown of the some of the common exclusions of life insurance policies-

Death as a Result of Lifestyle Diseases

Do not conceal any health-related information while filling out your application form. Lifestyle-related habits like smoking, drinking and other health risks associated with them are some of the crucial deciding factors.

People with coronary heart disease, blood pressure, diabetes, obesity etc. are more vulnerable to health complications. And, this is the reason why smokers need to pay a higher premium amount of a life insurance policy as compared to non-smokers because they impose a higher risk on the insurer. Even your driving habits are accounted for.

The insurance company will decide whether to accept or reject your application based on your lifestyle habits. Make sure that you accurately present your medical history to your insurer.

Self-inflicted Injuries

Accidental deaths resulting from deliberate self-harm, self-abuse, or psychological disorders are usually not covered by a life insurance plan. The beneficiaries of the policy cannot make a claim if the death of the policyholder takes place due to any such reason.

Involvement in Extreme Sports Activities

Death due to involvement in adventure sports like paragliding, scuba diving, trekking, water-sports activities, rock-climbing, sky-diving etc. are not covered under the life insurance policy.

However, there are some life insurance companies in India which have tried to fill the gap amid the increasing popularity of adventure sports/activities in our country. However, this extended coverage comes at a higher premium cost.

Man-Made Disasters

The claims arising due to riots or war come under man-made disasters. Any suffering or damage that is caused due to negligence on part of human-beings shall not be counted. This is to say, no coverage is provided if such a situation arises.

Loss of Life due to HIV and STDs

In case of untimely death of the policyholder due to sexually transmitted diseases like HIV/AIDS, the claim made by the beneficiaries will be rejected.

Intoxication and Overdose of Drugs

Consumption of drugs and overdose of alcohol and medicines can impose serious health risks and even result in death. If the death of a policyholder occurs due to overdose, it will lead to rejection of the life insurance claim.

Therefore, you should be responsible, else the dependent members of your family will not be given any death benefit by the company, and the purpose of buying a life insurance policy will not be served.

Criminal Intent/Illegitimate Activities

Risk arising due to involvement in any unlawful activity or intentional violation of the law is beyond the scope of coverage. If it is a sudden and unintentional act, only then will it be eligible for a claim.

Read the Fine-Print Carefully

It is advisable that you thoroughly read the life insurance policy's document and understand all the terms and conditions. It may be a little monotonous but it will be worth the weariness. Singing up for a policy without going through the exclusions can cost you more than you can imagine.

Nobody would let their loved ones face financial crises in their absence. So, it is suggested to be aware of all the exclusions of life insurance policy. Reading this will enables one to know what not to do to ensure claim processing in case of life insured's untimely death.

The Right Age to Buy Life Insurance

Life insurance is the simplest form of insurance which helps to secure the financial future of the insured's family, following his/her unfortunate demise. It can be purchased anytime; however, the premium of a life insurance plan depends on age, lifestyle, and financial goals of a person. It is best to buy life insurance as early as possible. The reason is, one can avail the plan at an economic price as low risks are associated with a younger age. If the advice of financial experts is to be considered, the starting month of the financial year (April) is the best time to reassess one's financial plans. On the other hand, if one considers the age factor, the below pointers should be kept in mind:

At the Age of 20

The 20s is the most crucial, yet sensitive, phase of one's life. People start a professional career or start making decisions on their own during this period. Though one may have less responsibility, re-paying debts, and impending dependency, but all these things must be taken into consideration.

In this regard, it helps a person mitigate all these risks. One big benefit of purchasing life insurance at this age is that one can avail a reasonably priced plan with a low premium, since the risk to the policyholder's life is comparatively less. In other words, (the) younger the policyholder, the cheaper the premiums will be.

In line with this, one can avail a life insurance plan with a sum assured of Rs. 50 lakh for a yearly premium of Rs. 3776.

At the Age of the 30s

This is the time when most people get married or start a family. With this, responsibilities also increase manifold. Not only people start thinking about securing the future of their child, but also worry about financial liabilities like car loans, home loans or other long-term commitments that require their utmost attention. However, the income usually increases with age and the standard of living also improves, in turn, making the expenses to spiral. Therefore, this is the time that one thinks of buying life insurance to protect the financial future of the family. One can go for (a) term plan with a monthly income option. This plan allows availing a monthly lump sum amount to pay-off (pay off) the debts, if any. This could be a great financial backing for the family and can help to bear day-to-day expenses in the absence of the sole earning member.

At the Age of 40

At the age of 40s, usually, there are long-term debts like home loan, car loan, etc. Moreover, responsibilities like a child's higher education, retirement planning, expenditure on old parents' ill health etc., need a considerable amount of money. Thus, one within age group of 40 requires a comprehensive cover that secures the future of his/her family. Buying a plan with a larger sum assured is recommended at this age.

When a 40-year male non-smoker can purchase a policy with Sum Assured of Rs.50 lakh, the premium will cost around Rs.7198/year. The same Sum Assured at the age of 50, will be available approximately at Rs.12,626/year. So, one shouldn't delay in buying life insurance cover.

At the Age of 50

When someone is or more than 50 years old, the premium of life or term insurance generally doubles as compared to what a 30-years old pays. No matter if one smokes or not, the premium will always be higher at this age. Despite this, it is recommended that one should invest in a life insurance plan, especially if he/she is the breadwinner of the family or has huge financial liabilities to pay off.

At the Age 65

Many may think that over 65 years of age, they won't be able to avail term or life insurance coverage. But, it's not true. One can buy it at any age. The only thing he/she has to compromise on is the policy term, i.e. at this age, going for a 30-year plan doesn't make any sense nor would one get the approval. Moreover, there are senior citizen plans specially designed to cater to the needs of this age group. These plans come with affordable premiums as well. At the age of 65 or more, one can go for a term or whole life plan that offers complete financial protection when there is no or less inflow of money.

How Does Age Affect Life Insurance Premium Rates?

While purchasing a policy, it is very important to compare life insurance plans online and understand the process of premium calculation. As we have earlier mentioned, there are various factors that determine the premium rate of a policy. One's age is the most important factor that plays a vital role in determining the premium amount.

The premium amount rises by 8-10% every year due to the increase in the insured's age. So, it is always beneficial to purchase an indemnity policy while one's young. If the insurance buyer is young, the premium rates of the policy will be low when compared to the premium rates for someone older. This is because young individuals tend to be less prone to life-threatening diseases and the possibility of death. Moreover, purchasing a life insurance policy at a young age can help the insured save a lot of money in the long run.

As a person grows older, the life expectancy of that person decreases, thus, they become riskier to the insurer. Rather than increasing the premium of the policy on every birthday of the insured, the insurance company spreads the premiums one would pay over 10, 20 or 30 years depending on the entry age of the insured and averages them into one amount. So, the premium amount paid by the insurance holder remains the same every year. However, the rate increases every year by 5-8% if an individual is in his/her 40s and 9-12% if an individual is above 50 years of age.

If a person waits to buy life insurance at a later stage in life, then he/she may lose out on the earlier, low-risk years that lower the average and end up paying higher premiums. Besides this, purchasing a life insurance plan at an older age can also lead to more hassles during the process of application. The insurer might ask the insurance buyers to do extra tests like EKGs and cognitive testing for dementia before issuing the policy.

However, paying more for indemnity policy does not disqualify an individual from actually getting it. It just means that the insured will have to pay a little extra premium. Having said this, paying a little extra in order to safeguard the future of the loved ones is wiser than not having a protection plan.

Moreover, there are many life cover policies that are designed to cater to the requirements of the individuals in their sunset years. These types of life insurance coverage policies may cover accidental death or final expenses that specifically cover burial/cremation costs.

In case of guaranteed whole life insurance, the insured does not have to undergo any medical tests and may be covered for a higher sum assured. This type is specifically designed to protect the family of the insured from the burden of paying for even the final expenses. For the life insurance policies that provide accidental death insurance, age is not a factor for the insured, plus an insured does not have to undergo any medical tests. However, coverage against accidental death can only be provided to the policyholders if they have taken accidental rider benefit along with the policy.

Age is the key factor to consider while zeroing on a life insurance plan. Young individuals, who have a good medical history and have taken their first step into the married life, should definitely consider purchasing a policy as it provides life protection to the family of the insured at a low premium cost.

How Much Insurance Cover Does One Need?

If one has dependents to take care of, but insufficient assets to cater to their needs in one's absence, it's understood that s/he will need a life insurance policy. However, the next major question which comes up is how can one calculate the worth of his/her life, i.e. how much money may one need? Although, it's the kind of question that nobody wants to ask, but when it comes to buying a life insurance, one should certainly be clear of this figure.

There is no denying the fact that the primary purpose of a life insurance coverage policy is to provide financial aid to the policyholder's dependents in case something unfortunate happens to him/her. Hence, the cover amount should be adequate to clear up all dues and generate a regular income source for the family of the insured.

The amount of life insurance cover that one will need actually depends upon the individual's circumstances and the type of plan s/he is looking for. For example, one can be looking for a life insurance plan to protect one's mortgage, cover debts, or to provide a lump sum amount to his/her loved ones to help them maintain their standard of living.

One's insurance cover amount can be easily calculated using a few basic tips:

How Much Does one owe?

The amount of debt one has on his/her name should be an important factor while finalizing the cover amount for a life insurance policy. This is because one would not want to force his/her family to deal with debt collectors or struggle to make final requirements..

For instance, if Mr. Kumar has a debt of Rs.20 lakhs, he should opt for a life insurance plan that will provide at least Rs.50 lakhs. This way his family will be able to repay the loan and also be left with a substantial remainder to live their lives comfortably. In order to ensure that his policy will cover the debt, Mr. Kumar must regularly pay the interest on his debt to safeguard it from snowballing into a large sum.

How Much Regular Income do one's Dependents Need to Maintain their Standard of Living?

Income replacement again plays a vital role in determining the cover amount one is going to need from his/her life insurance.

Let's say, Rohit earns Rs 10 lakh a year after tax and other deductions from his salary. In case he is not around, the expenses that were spent on him can be deducted, and hence the required income can be an estimated 80 percent of Rs.10 lakhs, i.e. Rs.8 lakhs. In this case, he will need a life insurance policy, which after his investments; will provide his family members with a minimum income of Rs.8 lakhs.

Again, the next crucial part is deciding for how long his family members are going to need this income. In this example, Rs.1 crore as the sum assured should be sufficient for 15 years, and Rs 1.5 crores for the next 25 years, assuming a real rate of inflation at 2.5 % annually, in the long term.

Furthermore, to decide the number of years that Rohit must replace his income, he will need to estimate the age at which his investments and savings will make him financially independent. He can either use the traditional retirement age of 60 years or contact a financial advisor to do the calculations for him.

If Rohit's wife Shikha is also working and he is partially dependent upon her income for his expenses, he can still follow the same principle for the income replacement. All he has to do is to keep an account for his wife's financial contribution to the family while calculating the cover amount of life insurance policy.

Are there any Future Financial Liabilities to Take Care of?

There may be certain future needs to keep in account for (such as one's kids' higher education, wedding, etc.), while calculating the cover amount of life insurance plan. One has to estimate the cost involved in these future expenditures and add them to the insurance cover.

It is advised to re-evaluate the life insurance policies periodically to ensure that they have an adequate cover, especially on the occurrence of major life events such as buying a new house against a loan, child's birth, etc. One cannot follow the ‘one size fits all' approach to decide the coverage amount of life insurance policy. Besides one's personal circumstances, one also needs to have a fair idea of how much s/he can afford to pay in monthly premiums.

There are a range of affordable indemnity policies available and the market is offering various flexible options to the customers in the form of regular income pay-out or a lump sum amount. By making a few right decisions, one can easily get an affordable life insurance policy.

Claim Settlement Ratios of Life Insurance Companies in India

Presently, 24 companies sell life insurance plans in India. Of all these 24 providers, the only provider under public sector is the LIC of India. The rest of the 23 companies are either private providers or joint ventures between national or international insurance/finance companies and private or public sector banks/financial institutions.

The access to life insurance sector was given to the private life insurers in the year 2000. Also, most of the private insurers have partnered with the international insurance companies to bring up their insurance venture.

An important parameter to judge the middle insurance company is by its Claim Settlement Ratio.

What is Claim Settlement Ratio?

A Claim Settlement Ratio (CSR) is the ratio of the total number of claims that an insurance provider settles to the total number of claims it receives in a year. CSR for life insurance providers is issued by the Insurance Regulatory and Development Authority (IRDA) of India, every year.

The formula to calculate the Claim Settlement Ratio is as follows:

Claim Settlement Ration = Total number of claims approved and paid by the insurer/Total number of claims received by the insurance company*100

For example, if the number of death claims received by the insurance provider is 1000, out of which it settles 980, the Claim Settlement Ration of that provider would be 98%.

Claim Settlement Ratio = (980÷1000) x 100 = 98%

The higher the CSR of the insurer, the better it is for its customers.

Claim Settlement Ratio of Life Insurance Providers for 2017-18:

Below is the updated data as per the IRDA official website with the disclaimer. Please update this table on the page:

Disclaimer: The ranking of the insurance companies in this content is not in any particular order. The list is not complied as per the IRDA ranking. 

The claim settlement ratio for the sector, on the whole, stands at 97.68% for 2017-18. There has been a decline from the CSR of 97.74% for 2016-17. The claim rejection ratio decreased to 1.10% when compared to 1.73% in 2016-17.

The report by IRDA also implies that the CSR of LIC was 98.04% at March-end in 2018. This was 98.331 on March 31, 2017. The claim rejection ratio for LIC has gone down marginally and is at 0.67% currently. This ratio was 0.97% at end of the fiscal year 2016-17.

For all the private insurance companies in India, the Claim Settlement Ratio has noticed a definitive growth of 1.52%. The ratio for the fiscal year 2017-18 is 95.42%, while in the previous financial year it was 93.72%. The claim repudiation ratio also came down to 3.97% for 2017-18 from 4.85% for the fiscal year 2016-17.

How to File Claims for Life Insurance Plans

Filing a claim and getting the assured amount is an integral part of the life insurance cycle. It is important to have the right approach to make a death claim. Here's how nominees of the deceased insured can make a claim in India -

These are the common scenarios under which life insurance claims are made -

• On the demise of the Policyholder
• On Maturity of the Policy

Things to Remember When Filling a Claim In Case of Death

Inform the Insurance Company: Contact the insurer as soon as possible on their toll-free number or inform them over email. It is always preferable to inform the insurer directly over a call to initiate the process.

Claim Intimation: The beneficiary or the claimant while lodging a claim with the life insurance company needs to share all the important details like -

• The Policy Number
• Name of the policyholder
• Place of death
• Name of the insured
• Name of the claimant

If the life insurance policy has been purchased offline, then the insurer has to provide a claim intimation form at the time of the policy purchase.

If it is an online insurance policy, it is simple to apply for the claim settlement through claim form online.

Claim Processing: In case of an accidental or natural death, the beneficiary or the nominee needs to submit all the supporting documents to the life insurance company as a part of the claim process.

The claim support team then evaluates the insurance documents and claim declaration, and validates the same. In some cases, they might ask the beneficiary to submit a few other documents.

Documents to be submitted

• The original copy of the insurance policy
• The claim form and the death certificate of the deceased person
• If someone other than the assignee or the nominee makes the claim, the insurance company can ask for the legal title of succession.
• Deeds of assignment, if any
• Discharge form signed by the witnesses
• Supplementary documents like post-mortem reports, hospital certificate, and doctors certificate (if required)
• The investigation report in case of police inquiries

Approval and Pay-out

• Once all the documents have been submitted, and the life insurance company has looked into the veracity of the claim thoroughly, the claim will be settled by the insurer.
• The life insurance company can ask for the beneficiary's bank details - a canceled cheque or a copy of the bank account passbook, which has been attested by the bank authorities.
• For nominee's identity proof, a copy of passport, Voter identity card, PAN card, Aadhar card etc. need to be submitted.
• Generally, the claim settlement process takes 30 days. But once it is approved, the insurer may immediately make the payout.
• Some insurers make the payments through the Electronic Clearance Service or ECS, which is an alternative method to make bulk payments.

Aforementioned are the basic set of documents that are required to process a claim.

Here are (a) few other documents that the insurer can ask for (if need be) -

• Employer's certificate
• Some other forms or reports to support the investigation or verification

Claim Settlement Process to be followed on the Maturity of the Life Insurance Policy

If the insured outlives the policy term, he/she will be eligible to claim maturity benefits. However, the insured must make sure the policy is ongoing and that all the premiums have been duly paid.

There is a clear-cut process to file a maturity claim and it involves minimal paperwork.

When the policy is about to mature, the life insurance company generally intimates the policyholder at least 1-2 months in advance. All the details regarding the maturity date, maturity amount, and discharge voucher are provided to the insured.

The discharge voucher (similar to a receipt) has to be signed by the policyholder in the presence of the witnesses. The voucher is then sent back to the insurer along with the original policy bond, on the basis of which the payment is released.

In case the policyholder has assigned the life insurance policy to another individual or entity, then the assignee must give the discharge voucher to the insurer, in order to receive the claim amount.

Points to Remember-

• This process is applicable only to the life insurance policies with maturity benefits like additional bonus, survival benefits, etc.
• In the event of the demise of the policyholder after the maturity date of the life insurance, but during the policy discharge procedures, it will be considered as a maturity claim. And the claim amount will be paid out to the nominees of the deceased policyholder.

The Revelation of all the Facts

At the time of buying a new life insurance plan, one must mention the details of any previously purchased policy so that the insurance provider must be aware of the existing policy and can help the insurance seeker choose the right policy as per his/her needs. Otherwise, misrepresentation can be a reason for the rejection of death claim.

IRDA Claim Settlement Ratio for Top 10 Life Insurance Companies

There has been a tremendous growth in the performance of the life insurance segment in India. In this regard, the claim settlement ratio of a company plays a significant role as it indicates the reputation of the insurance company. It shows how many death or maturity claims have been settled in a particular financial year. In line with this, below is the data table on IRDA claim settlement ratio for the year 2016-17 for the life insurance companies in India.

Top 10 companies having the highest claim settlement ratio in India-

When it comes to claim settlement, the entire life insurance sector has seen a growth of 7.8% in the last 3 years. In 2016, 8.5 lacs life insurance claims were settled with a settlement amount of ₹12,600 crores. The business, in general, has grown by 8% and the operational ratio of LI business is considered stable now.

Tax Benefits of Life Insurance Plans

The life insurance plans not just provide comprehensive financial protection to the policyholder's family or dependents, but also offers the advantage of tax benefit. Here are the tax benefits offered under a life insurance plan.

One can gain a tax benefit by investing in a life insurance plan under section 80C of Income Tax Act 1961. Under this section of the IT Act, the premium paid by the insurance holder towards the policy is eligible for tax deduction. Moreover, the maturity proceeds are also qualified for tax exemption U/S 10(10D) of IT Act 1961.

Deductions:

Section 80C:-

There are various investment options which provide the benefit of tax exemption U/S 80C of Income Tax Act. Under ITA the Hindu Undivided Families (HUF) and individuals can avail tax exemption. 

Under different sections of IT Act such as 80C, 80CC, and 80CCE one can avail the maximum tax exemption of up to Rs.1, 50, 000.

The premiums paid up to a maximum 20 percent of the sum assured amount of the plan are applicable for deductions. In case, the premium amount paid by the insured, in a particular financial year, is more than 20 percent of the actual sum insured, it does not qualify. Nevertheless, only those policies are applicable for tax exemptions which are issued before March 31, 2012.

On the other hand, if the insurance policies are issued on or after 1^st April 2012, the tax exemptions are only applicable for the premiums payable not exceeding 10 percent of the actual Sum assured.  

In case, the policyholder claims tax exemption under section 80C and if the life insurance policy has been terminated or canceled within the term period of 2 years from policy initiation, then the tax benefit availed by the insured will be reversed. This type of tax deduction is valid to all types of life insurance plans, except Unit Linked Insurance Plans (ULIPs).

In ULIP plans, if the insured can claim for tax exemption U/S 80C and if the plan has been terminated or canceled within the initial 5 years of the policy tenure then the tax exemption availed by the insured will be reversed. 

Exemptions:

Section 10 (10D):

Any amount of sum received under life insurance plans is eligible for tax deduction. The sum assured amount received can be: 

• Death Benefit
• Survival Benefit
• Surrender Value
• Maturity Benefit
• Sum accrued through bonus
• The interest earned on ULIP plans is also tax deducted

 Let's take a look at the situations under which the insurance from the life insurance policy is taxable.

• Annuity and pension plan payouts are taxable.
• Employers sponsored Group life insurance policies.
• Plans that are bought between April 1, 2003, and March 31, 2012, whose premium rate in any year is more than 20% of the sum assured.
• Plans that are bought after April 1, 2012, in case the premium of the policy  in any year is more than 10% of the sum assured
• Plans that are bought after 1^st April 2013 for individuals who suffers from disability or diseases under Section 80DDB, in case, the premiums of the policies are more than 15% of the sum insured.

The above-mentioned factors are not applied to the death claims or any amount of sum that the nominee receives in case of unfortunate demise of the insured.

No limit on the highest amount of deduction is applicable under Section 10 (10D) of the Income Tax Act, 1961.

Note: The above-mentioned data is taken from the IT Act 1961. However, tax laws are subject to change, thus it is important to go through the latest tax changes under the aforementioned sections before deciding the financial objectives.

Online vs Offline Life Insurance

Amid growing number of online shoppers, many are still apprehensive about purchasing a life insurance policy online. Those who are in a fix, this will help them out -

Benefits of Purchasing Life Insurance Policy Online

Easy To Compare

• When purchasing a life insurance online, one can compare various plans offered by different insurance companies. One can check and carefully examine which company is taking lesser premium, which plan is offering greater coverage, and then select the one that serves the purpose right. Even customizations are possible.
• When buying it offline, i.e. from an agent, one does not have the option to compare indemnity plans.

Transparency

• When searching online, one can log on to the company's website and download the policy documents. It is easier to understand the policy benefits and limitations online. One can even keep such documents on their system for future references, thus reducing the chances of being misled.
• Quite the reverse, when purchasing offline, there is always a chance for an individual to get manipulated by the agent. Usually, higher expectations are set to close the deal, which only leads to disappointment.

Make an Informed Decision

• One can check the claim settlement ratio of the insurer from which he/she is planning to purchase a life insurance policy. It will help one to examine if the insurance company will be able to settle the claim or not. Once assured, an individual can enjoy the peace of mind.
• When buying it offline, one is dependent on the particular insurance agent to furnish true statistics about the claim settlement record of the company, and the authenticity of the insurance agent is always questionable.
• Try to select the life insurer with the highest claim settlement ratio, if it meets the key requirements.

Easy to Access

 As compared to insurance agents, Insurance companies functioning online are accessible to their customers 24*7. One can always reach out to their customer care team to get his/her concerns addressed.

The Cost Factor

 Online life insurance plans are 40 to 60 % more affordable as compared to their offline counterparts because the commission charged by agents is eliminated.

Flexibility

There is more flexibility when one purchases a life insurance plan online, as he/she can choose from a range of options. It is recommended to do a comprehensive research online, which leaves no scope of an individual being misled by an insurance agent he/she has never met before.

Policy Reviews

 Customer reviews on their website can help one to understand the market presence of the insurance company and its services. Already, sustained by demand, the companies are expanding their online product bouquet because of the above-listed reasons.

Benefits of Purchasing Life Insurance Policy Offline

• The Accuracy of the Sum Assured: Insurance companies can lure their customers by promising them a higher sum assured on their website. When making an offline purchase, one can see the documents psychically and then sign up for a plan.
• Rider Benefits: Considering both online and offline plans, it is clear that online purchase is a better and more convenient option. Taking into account the lower cost of premiums, easy policy comparison, higher sum assured, flexibility in applying, and simple rider benefit addition are some of the major positive factors for online life insurance.

Step by Step Process to Buy Life Insurance Plans Online

Buying insurance online, be it life or general, is the most convenient and cost-effective way than buying one offline. That's why, keeping the convenience of an insurance buyer in mind, most of the insurance companies have made the entire range of their products available online. To avail this, one just needs to follow a simple process that will enable him/her to purchase life insurance online.

There are two ways to buy an insurance policy online: either by visiting the official website of the insurer or comparing plans through an online insurance aggregator website. These websites allow life insurance seekers to compare policies on parameters such as premium, benefits, claim settlement ratio, etc. This way, one can weigh the pros and cons of a policy and get to know a plan that meets his/her insurance needs. Below are the steps:

Provide Basic Details

The insurance seeker has to provide his/her basic details in the application form such as name, date of birth, contact number, smoking habit (if any), income and expected life cover. Once this information is given, a suitable life insurance plan with benefits and features will be shown on-screen. Once done with going through the overall plan, the customer can select the right policy that meets his/her requirement and clicking on available suggested options.

Pay the Premium

The next step is to pay the life insurance premium online. One can pay the premium using the available payment modes. Once the payment is successful, a confirmation message will be sent to the registered contact number or e-mail id provided by the customer.

The basic procedure for issuing a policy also includes filling a life insurance proposal form. The customer needs to fill this form once the insurance premium is paid. This form requires the insurance seeker to fill relevant particulars like personal details, existing life cover (if any), health details, and finally the lifestyle and nominee details. Every detail needs to be authentic.

Furnish Relevant Documents

Next, the customer needs to provide relevant documents, such as identity proof, address proof and health certificates. The ‘to-be-uploaded' list of documents will be sent to the life insurance seeker at the time of filling the form.

Pre-policy Health Test

Some insurers have made it mandatory for a life insurance policy seeker to undergo a medical test. In such cases, the customer needs to present the test report. If the insurance company suggests any medical Centre for the test, the medical Centre will directly send the test report to the insurer.

Issue of Policy

After verifying the proposal, including documents and medical test reports, the insurer will decide whether to issue a life insurance policy or not. If the application is approved, its confirmation will be sent to the applicant along with the policy document.

Guidelines to Choose the Best Life Insurance Policy

Choosing the best life insurance plan can be a daunting task as each plan has its own pros and cons and each is quite difficult to comprehend at the first glance.

So, here's a quick rundown of certain facts that one must consider to make the right purchase -

Time Period

It is one of the most important deciding factors in selecting the right life insurance plan. If an individual wants a lifelong insurance plan which can see to his/her family's well-being after his/her demise, then a whole life plan is the right choice.. One should look for a plan that offers him/her Human Life Value, and includes a salary cover and loan reimbursements (if one requires).

If one needs a protection plan for a certain time period, he/she can go for term insurance. If one wants to save some funds for his/her children's education, then he/she can buy a 10-year term life insurance plan with return of premium add-on.

To pay off his/her debts, one can buy a plan for that specific period. One can check out various other types of plans like ULIPS, pension plans, money back plans, endowment plans etc., based on the time-period and individual needs.

It is recommended that one buys a life insurance at younger age. One will be able to accumulate more saving that way.

Premium

If one wants to buy just for the investment or tax-saving purposes, then the premium is a crucial deciding factor. For example, the premium amount for endowment plans, Unit Linked Insurance Policies, and Whole life policies are on a higher side when compared to Term Insurance, Money Back Plans and Pension Plans.

It is important for one to know that if he/she is not able to pay the premium on time, then the taken life insurance policy can lapse.

Dependents

If one is the only breadwinner of the family, buying a life insurance plan should be his/her priority. The reason is, in such a case, one's family is dependent solely on his/her income, and nobody wants their loved ones to suffer due to loss of income in case of sudden death. Analyze the number of dependents and search for a plan that provides maximum coverage.

Evaluate the Sum assured of Insurance

One is recommended to have a fair estimate of the assured amount of his/her life insurance policy, and then search online for different companies.

It might be confusing initially, but, if one follows the above-mentioned steps, he/she will have a clear picture. One can check out various life insurance companies on our site and then make the right decision.

Compare Life Insurance Quotations

Shortlist 3 to 4 companies after comparing them on our site, go to their website, click on the plan and ask for a quotation. Fill the application form with accurate information to get the exact details. After submitting the form, one will receive free quotations from the selected companies.

Choose the Best Life Insurance Company

Once you have received different quotations, compare all of them and choose the one that caters to most of one's needs and preferences in terms of the policy period, budget, premium, and coverage.

Purchase Policy Online

Once an individual has selected a plan/company, he/she can make the purchase from its website. There might be certain formalities that one will need to fulfill which may vary from one insurer to another.

Some companies may require an insurance seeker to undergo pre-medical tests before the signing off. Whereas, some companies may send the documents at home which one can sign and submit them to the company as per their rules and regulations.

It is so convenient to purchase a policy online as it is easy to search, compare, and get quotations online.

Keep it Safe

The policy documents are no less than any other legal document that one possess. Therefore, it is suggested to always keep them in a safe place and make sure that the beneficiaries and the family members of the insured know about their whereabouts.

Life Insurance Online Payment

Presently, while one wishes to make payments for the premiums for his/her life insurance policy, one can make the online payment conveniently. There are many modes of online payment available such as internet banking, mobile banking, credit card, debit card, etc. One is given an option for automatic payment as well where the amount of the premiums gets deducted from his/her linked bank account directly on monthly, quarterly, semi-annually, or annually basis. The options for payment include NEFT, eCMS, Standing Instructions (SI) mandate, Electronic Clearing Service (ECS), Auto Debit facility by the Reserve Bank of India (RBI), etc. Such options for online payment will be based on the provider chosen by the insured. One can pay simply by logging into the insurer's official website or by visiting the internet banking portal of the bank.

Life Insurance Policy: Required Documents

Documentation is the official procedure that contains all the official information regarding the insurance contract between the insurer and the insured. Alternatively, documentation stands for a compilation of documents that is used as a written evidence of the information.

Like in every other segment, insurance companies also need proofs while issuing a life insurance policy. The policy seeker is required to submit all the relevant documents in order to avail the policy. This process is done before the policy is issued. The applicant can either upload it directly by visiting the official website of the insurer or e-mail it to the insurer's customer service id. He/she can courier it to the official address as well. These documents also need to be self-attested by the insured.

At the time of applying for a policy, the life insurer will ask for the below-mentioned KYC documents:

Income Certificate

This is necessary to estimate the sum assured or cover that is to be offered to the insured. In most of the cases, the life insurance companies offer a cover up to 20 times the proposer's annual income. The standard income proofs include:

• Last 3 to 6 months' salary slips (depending on the insurer)
• Income Tax Returns (ITR) of last 2 to 3 years
• Last 6 months bank statements with continuous entries of 3 months credited salary
• If the person is self-employed then CA certificate
• Latest Form 16

Address Proof

Insurance companies would ask for address details of the applicant. These documents can be used as address proof-

• Voter ID card
• Aadhaar Card
• Saving bank statement
• Passbook with latest 6 months entries
• Latest 3 months Credit Card Statement
• Driving License
• 3 months Utility Bills
• Passport
• Ration Card

Identity Proof

One can provide the flowing documents as ID proof:

• Passport
• PAN Card
• Aadhaar Card
• Voter Id card

Age Proof

Some of the aforementioned documents would be considered as age proof as well. However, below is a comprehensive list of documents that can be used as age proof:

• PAN Card
• Aadhaar Card
• Voter Id card
• Driving License
• Passport
• Ration card
• Marriage certificate
• School/College leaving certificate
• Birth certificate

Other Documents of Life Insurance Policy

Apart from the KYC documents, there are some other documents that the insured must know before taking a life insurance plan. These include:

• Insurance application or proposal, which is the first document in the insurance contract.
• Policy declaration, which is necessary if someone other than the insured has filled the policy proposal form or if the proposer is not educated.
• A final declaration at the end stating that all the provided information is true and that if anything is found untrue, the insurer has the right to reject the application. Subsequently, the contract is rendered as null and void and the premium paid would be surrendered. Thus, once declared by the proposer, the entire process is completed with utmost faith.
• In case the policy is required to be registered under the Married Women's Property Act, a separate form needs to be filled and submitted to the insurer, mentioning the nominee and trustees.
• Policy proposal also includes a personal statement, which is attached to the declaration at the end of the proposal. Any incorrect statement may lead to rejection of the application.
• As per the IRDA rules, after verifying everything, a copy of the proposal would be sent to the insured within 30 days of the completion of the formalities.
• IRDAI also states that the insurer must make a decision on the proposal within 15 days.
• First Premium Receipt is the proof of the conclusion of the contract. However, as per the IRDA regulations, the insured can withdraw his/her policy within 15 days of the policy issue date, if not satisfied. This period is called Free-look Period or Cooling-off Period in insurance terms.
• At the time of paying the annual premium on policy renewal, the insured is provided with a premium receipt which is an important document for further reference.

How to Calculate Life Insurance Policy Premium?

The premiums of a life insurance plan differ according to the credentials of the applicant and the plan chosen by an individual. Generally, a younger and healthier individual is likely to have a lower premium as compared to a person who is nearing his/her 50s. Similarly, the premium for a non-smoker will generally be lower, whereas a smoker is likely to be charged a higher premium. Apart from these factors, there are several other factors that determine the premium amount of a life insurance policy.

One can use a premium calculator in order to find and select the most beneficial life insurance plan, at an affordable premium rates. Premium Calculator is a tool which is designed to estimate the premium amount the insured is required to pay for the chosen sum assured amount. Also, the premium calculator estimates the premium amount on the basis of the policy chosen by the policy buyers and technicalities like age, tenure, premium frequency, etc. While making use of the premium calculator the insured will have to provide certain information like:

• Age of Applicant
• Plan Name
• Premium Frequency
• Sum assured
• Tenure
• Rider (If any)
• Gender
• Date of Birth
• Proposer's name

Once the insurance buyers enter all the required information, an estimate premium amount is displayed.

Features of Life Insurance Premium Calculator:

• Coverage- The life insurance premium calculator helps insurance seekers to decide the exact amount of coverage they require in order to safeguard their families in case of an emergency or the unfortunate demise of the insured.
• User-Friendly- Premium calculators are simple and easy to use financial instruments. All one needs to do is to fill-in the required details and the information will be displayed.
• Analysis- Insurance buyers can compare the various life insurance plans and analyze the cost of the policy vs the benefits offered by the policy by entering details like date of birth and other particulars related to insurance.
• Comparison- In order to choose the most beneficial life insurance plan according to one's own suitability, the customers can provide the details related to various plans and can compare and analyze the plans according to the premium amount and level of cover.
• Simplifies Difficult Data- Most insurance seekers find financial data and tax calculation relating to an insurance policy very confusing. The premium calculator provides the data instantly and without any hassles.
• Provides Better Knowledge of the Product- As the premium calculator provides an option to analyze, compare, and simplify complex data, insurance buyers can better understand the policies offered by the life insurance providers.
• Customization- According to one's own requirement and suitability the customers can make customizations by entering specific details related to the policy like premium paying tenure, date of birth, etc.

Steps to Use Life Insurance Premium Calculator

Filling the information in the life insurance premium calculator and getting the premium quotes of the policies is a simple and hassle-free process. One just needs to follow these three simple steps in order to calculate the premium of the policy with the help of a premium calculator:

Step 1- Enter personal information like date of birth, marital status, gender, annual income, life cover, number of dependents, etc. The customers may also be required to mention their smoking habits.

Steps 2- Once the policy buyer has entered their personal information, he/she will have to enter the amount of sum assured they want and for how many years. Moreover, the customer will also have to mention how they would like their family to receive the benefits i.e. in a lump-sum or as a monthly income.

Step 3- In the final step, the premium calculator will display some relevant plans as per the details filled by the customers. The insurance seekers can compare the plans and choose the most beneficial plan according to their suitability.

Factors that Affect Life Insurance Policy Premium

Before zeroing in on a life insurance policy, it is important to understand how the annual premium is determined. Irrespective of the type of policy one wants to buy, its annual premium depends upon various factors of life. Listed below are some of the important factors that affect the premium of a life insurance plan.

Personal Factors

• Age- The age of the insurance buyer is directly proportional to the premium of the life insurance policy. So, it is best to get a policy as early as possible. Younger individuals are considered to be healthier as compared to older individuals and tend to pose a lower risk to the insurer. Thus, the premium of a policy bought at a younger age is more affordable.
• Gender- According to studies, it has been found that women generally outlive men. Moreover, as per statistical findings, it has been observed that women generally go to the doctor more often than men. Thus, these factors mark women as low-risk individuals, as a result of which they are assigned a lower premium.
• Medical History (Self & Family) - The medical history of an individual and his/her family is a significant factor which determines the premium amount of a life insurance policy. The premium amount of a policy depends on the severity of any past or current illnesses. For example, if an insurance buyer proves that he/she has totally recovered from a critical illness and is taking good care of his/her health then the insurer may charge a lower premium. However, the reduction of the premium rate depends on the insurer and type of life insurance policy an individual opts for. In certain cases, like cancer recovery, most of the companies do not offer a cover until the policy buyer proves that he/she has been in remission for a minimum of 5 years.
• Marital Status- Marital status of an individual plays a vital role while deciding the premium amount and processing the insurance application. If a couple buys a joint life insurance policy, then the premium of the policy will be higher as compared to the regular policy. It is important to keep in mind that in a joint plan the payout is given on a first death basis and there is no payout in case of loss of the second partner.
• Weight and Height- While determining the premium rate, the insurer considers the individual's BMI (Body Mass Index). As obese people are more prone to suffer from weight-related medical problems, they will have to pay a higher premium on their life insurance policy.
• Occupation- The occupation of an individual plays a significant role in determining the premium of the policy. For instance, pilots, soldiers, individuals working in the mining industry, oil and gas plants, or any other dangerous profession have to pay a higher premium.
• Debts- Any unpaid debts, including mortgages, loans, credit card bills, etc. are one of the major factors that determine the amount of protection one is offered.
• Drinking and Smoking- An individual will be classified as a smoker by the insurance company regardless of whether he/she is a light smoker or a heavy smoker. Thus, this results in a higher premium amount. Similarly, those who regularly consume alcohol can be subjected to an inflated premium, because it escalates the chances of alcohol-related health problems in an individual.
• International Travel- If the life insurance buyer is a regular traveler and visits places that pose potential health risks, or have a high crime rate, or see regular acts of terror, s/he may be charged a higher premium. For instance, traveling to countries in Eastern and Southern Africa, where a high percentage of the population suffers from HIV, will likely result in a heavier premium than travelling to Norway.

Insurer Related Factors

• Mortality Cost- Mortality cost is the amount paid by the insurer on life insurance policies. The insurance company considers the age of the applicant, health history (self and family), employment, driving records, hobbies, etc. while determining the premium amount for an individual.
• Operating Cost- The total operational cost that the insurer incurs towards non-marketing and marketing expenses like rent, maintenance, legal fees, salaries, agents' commission, etc. affects the life insurance policy of an individual and how the premium is calculated.
• Interest- In certain policies, the company invests the insured premiums in real estate, bonds, stocks, etc. under the assumption that the insured will earn a particular rate of interest on these investments. This interest-earning is another important factor while determining the premium rate of a life insurance plan.

Policy Related Factors

• Whole Life VS Term- As whole life insurance policies provide coverage until death; they generally charge higher premiums as compared to simple term plan that provides coverage only for a fixed number of years.
• Decreasing Pay-outs- The life insurance policy premium calculation also depends upon whether an individual wants to have the extent of coverage decrease year after year, or s/he decides to have a fixed cover for the entire tenure of the policy.
• Covers- In case an individual opts for a joint life insurance cover, then the premium amount of the policy tends to be higher, because the plan is more likely to see a claim at some point. Moreover, a policy that provides critical illness cover like heart disease, diabetes, hypertension, etc. will also charge high premium rates. The premium rates are expensive for individuals above 60 years of age or those suffering from any pre-existing diseases.

Illustration of Calculation of Life Insurance Policy Premium

The calculations of premiums of life insurance are complex and cannot be done by potential consumers on their own because of several underlying factors. You can make use of a premium calculator to compute the coverage amount. This is explained with an example below:

The premium calculator consists of various fields on the chosen plan. Below is the example of a New Endowment Plan:

• Type of the Plan: New Endowment Plan
• Age of the Policyholder: 38 years
• Term of the Plan: 20 years
• Sum Assured: Rs. 10 lakhs

Accident Rider/Benefit: Yes/Selected*

*The Accident Rider offers an additional cover for a death caused due to an accident above the base insurance plan, by summing up a small amount of the premiums on the base premiums. Other insurance companies may offer or may not offer the accident benefit rider.

The inferences drawn from this calculation are as under:

• Annual Premium: Rs. 49,940
• Semi-annual Premium: Rs. 25,235
• Quarterly Premium: Rs. 12,750
• Monthly Premium: Rs. 4,250

The aforementioned figures of premiums are shown in four different types. Generally, annual premiums cost you lesser in the long-term choice for more frequent monthly, quarterly, and semi-annual options.

Term Life Insurance vs. Whole Life Insurance

Term life Insurance differs from Whole Life Insurance in many ways. One must understand these plans carefully before buying one from insurance providers. Though both of these plans offer Life cover, the benefits the insured derives from them differ significantly. An individual's life and finances can be affected if s/he chooses the wrong plan. To avoid any kind of inconvenience in the future, one can consult a reputed financial advisor and have a clear idea of which plan suits his/her needs.

Which one of these is ideal?

After carefully analyzing various aspects of both the aforementioned plans, one must understand that each of these plans has its own benefits. The applicant can choose a combination of both the plans to avail the best protection for his/her life. Remember, one can buy both these plans depending on his/her financial status and future goals. In this manner, one can get the best of both the plans and offer proper protection for his/her immediate and long-term goals.

Life Insurance Plan Vs Life Annuity Plan

There is a thin line difference between life insurance plan and a life annuity plan. In the case of policyholder's unfortunate demise, life insurance provides financial protection to the policyholder's family. Whereas, the annuity plans are specifically designed to provide retirement income to the insured post-retirement. Let's take a look at the difference between a life insurance plan and a life annuity plan.

Which one of these is Ideal?

The best way to determine which plan is right for investment, life or annuity is by determining the purpose of investment.  If the main purpose of an individual is to provide financial protection to their dependents even in their absence then they should consider investing in a life insurance plan. However, if one wants to accumulate wealth so that they can secure their future after retirement then they should consider investing in life annuity plans. So according to one's own purpose and requirement, the insurance buyers can choose to invest in both the plans.

Best Plan for Youngsters and First time Policy Buyers:

If an individual is still in his/her 20's and unmarried, s/he can conveniently pick a term life insurance plan. A term plan should be the first scheme that one chooses, as the amount charged as premium is comparatively very low. Yet there is another benefit of buying a term life insurance policy early and which is that the amount of premium will be fixed for the rest of the term of the policy.

Best Plan for Married Individuals with Children:

The financial goals of an individual may change once s/he is married and has kids. Thus, s/he has to plan accordingly. Whole life insurance schemes offer the best savings along with safety for their future. The insured can continue with his/her existing term plan, if s/he already has one, and add a new Whole life insurance as a supplement.

If one does not have a life insurance plan and wishes to start investing in one, s/he can opt for a combination of both the plans and divide his/her finances after consulting their insurance agent. It is good to buy a term policy and secure one's family. Also, s/he has to pay lower premiums in comparison to other life insurance policies. Once this is done, s/he can focus on Whole Life plans and purchase multiple policies with different maturity dates. This will be a better way to organize significant financial assistance for one's future needs.

Best Option For late Beginners in their 40's:

If an individual does not own any life insurance policy yet, one should choose a small term plan. The insured has to pay a higher amount of premium for the same sum assured as compared to those policy buyers who are younger and has started their policy in their early 20's.

Group Life Insurance

A group life insurance policy is provided by employers, business groups, banks, and housing societies to help their employees, clients, and members.

The employer retains the group life insurance policy contract and the insured employees receive a certificate of insurance coverage. On policy termination, the policyholder will need to present this certificate to the concerned insurance company.

Breaking it Down Further

• Low Price- Employees have to pay a very low cost, sometimes no cost at all, to avail a group life insurance policy. Usually, the employer pays the premium as a welfare measure for its employees. When home loan providers or credit card companies provide group life insurance to their customers, the policyholders have to pay a premium but it is comparatively lower than that of an individual coverage.
• No Pre-Medical Tests Required- In most cases, a pre-medical check-up is not required for availing group life coverage. It can be a big advantage if a person is not able to avail a personal cover due to certain lifestyle habits and pre-existing health conditions. An individual life insurance plan in such a situation will mean paying an exorbitant premium.\
• Easy Claim Process - In a group life insurance policy, the claim process is quite simple. The employees are automatically covered by a group life insurance policy issued by their employer. The employee only needs to accept the life insurance policy from the employer and get the certificate of insurance to make the claim in future.
• Tax Saving- Both individual and group life insurance policies provide tax exemption benefits. In group life insurance, the employer purchases the group policy on behalf of the employees, therefore, the tax benefits will be provided to the employer in a group life plan.

How does a Group Life Insurance Plan work?

• Usually, a group life insurance plan is more like a term life insurance plan. It implies that a fixed amount of sum assured or a life cover is provided in case the policyholder dies during the policy term. The sum assured is not refunded on the maturity of the policy.
• A beneficiary can be nominated from the family who will get the sum assured in case of the policyholder's death.
• The sum assured is based on the individual's salary package and varies from one company to another. To increase the sum assured of a group life insurance policy, one will have to pay some extra premium.

How long is a Group Life Insurance Policy Applicable?

The coverage is provided as long as a person is a part of that organization. When they resign or retire from that organization, they will have the option to convert the group life insurance plan into an individual plan.

To do so, the certificate of coverage given by the employer must be presented to the insurance provider.

Individual Life Insurance vs. Group Life Insurance

An individual life insurance policy is purchased to safeguard the dependents members of one's family. In a group life insurance policy, a group of individuals is given insurance under a single master policy.

Please note that group life insurance is not an alternative to an individual life insurance policy, especially, if a person is switching between private jobs.

Everything You Need To Know About Underwriting

Definition of Underwriting:

In simplest words, underwriting refers to the process followed by an insurance company wherein a designated individual analyzes the risk involved in insuring a potential insured (customer). In the evaluation process, the amount of coverage for the applicant, as well as the premium amount to be paid by her/him will be decided.

So, while underwriting a prospective customer, the insurance underwriter aims to protect the insurer's business if the customer appears to be too risky. Keeping this point in mind, one should understand that when a prospective customer comes at too high a risk to the insurance company, s/he may be denied life insurance.

Different Factors to Take into Account While Underwriting a Life Insurance Policy:

There are a lot of factors that should be considered while underwriting a life insurance policy. Naturally, the first and foremost factor is the life expectancy of an applicant. If the applicant leads a healthy lifestyle, the insurer is more likely to approve his/her application. This is because such a candidate will give the insurer a chance to balance the sum assured offered with the total premiums paid by him/her during the tenure of the life insurance policy.

Besides the applicant's life expectancy, insurers also analyze several other factors that can lead to the applicant's early demise, such as one's family history of medical ailments including stroke or cancer, her/his occupation, etc.

Below we've Enlisted some other Criteria that Influence one's Risk Assessment:

• Age of the Applicant: Individuals who are still under or in their thirties are considered low-risk applicants and, hence, may qualify for affordable life insurance policies with low premium rates.
• Gender of the Applicant: As per scientific research, it has been found that women have a longer life expectancy as compared to men; hence, their chances of getting an affordable life insurance policy are higher.
• Personal as well as family Health History: If someone in your family suffers (or has suffered) from serious ailments such as cancer or heart problems, then you will also be considered as a high-risk applicant. Additionally, if you have gone through some serious surgeries in the past or if you regularly fall ill, your application might be rejected by underwriters on the ground of higher risk involvement.
• Number of Dependents: If the applicant is married and has children, chances are s/he will be offered family floater plans, wherein one can avail a lower premium amount.
• Smoking Habits: If the applicant happens to be a smoker, the premium rates for her or him can increase by 100%.
• Nature of the Applicant's job: In case the applicant's occupation requires him/her to regularly be in a hazardous environment or situation, such as fire-fighting, mining, etc., underwriters will regard his/her case as high-risk and hence s/he may be granted the life insurance policy at a very high premium rate, or in the worst case scenario, s/he might be denied the insurance.

Thus, one can conclude that there are some of the factors that determine if the underwriters will approve one's application or not. Knowing these factors can help individuals assess their risk and accordingly and estimate their premium.

What Should a High-Risk Applicant do?

Due to many factors contributing to the approval of one's application, there is always a possibility of people falling into the high-risk category. Such individuals either have their applications rejected or end up paying high premiums.

Thankfully, there is an abundance of middle life insurance companies that specifically focus on high-risk applicants. These companies not only offer the best life insurance policies at affordable rates but also have a wider range of experience when it comes to dealing with high-risk applicants.

Life Insurance Policy for Senior Citizens

To help avoid the financial stress at their golden days, insurance companies in India have introduced various coverage policies for senior citizens, such as Whole Life Insurance, Term Insurance and Guaranteed Life Insurance. Senior citizen life insurance plans allow insurance holders to save systematically and generate the much-needed corpus to make the autumn days more contented. Below are the 4 senior citizen life insurance plans offered by various insurers:

Life Insurance Policy for Women

Financial planning is equally important for working women. Having life insurance can help one secure their family against financial uncertainties. It helps self-empowered women to systematically plan important goals of their lives. With the changing scenario of the financial market, insurance companies have come up with different life insurance plans to cater to the needs of every walk of life. The life plans designed for women offer life coverage + saving options for the future. Below are the four  life insurance policies for women:

Life Insurance Policy for Smokers

Every smoker should have life insurance, as the life expectancy of a smoker is lesser than that of a non-smoker. Smoking is not just injurious to an individual's health; it also affects one's pocket, when it comes to purchasing a plan. As it may lead to premature death, insurance companies are more cautious while issuing coverage to smokers. Hence, to help smoker individuals, below are some specifically-designed life insurance plans:

Life Insurance Policy for NRI

Thanks to the increased insurance awareness, proactive financial planning has earned its due importance. Better yet, the premium for online term plans has decreased. This has grabbed the attention of Non-Resident Indians as well. They are looking forward to buying life insurance plans in India. As a result, the best insurance companies have re-strategized their business model to leverage this huge potential market.

Term Plans offers pure life coverage and offer financial security. Most term plans offered by the best life insurance plan providers in India can also be purchased by a Non-Resident Indian. In essence, these are the same plans that are offered to Indians resident as well.

The Purpose of an NRI Life Insurance Plan

For a Non-Resident Indian, whose spouse, children and parents live in India, a perfect NRI plan must offer the following features:

• Guaranteed Income- It must offer guaranteed income at regular intervals for the dependents.
• Wealth Maximization-It must offer wealth maximization to the policyholder and his/her spouse to help them accomplish their financial goals.
• Children's Education- It must offer a benefit that can be used to meet the children's educational expenses.

Generally, the best life insurance plan is clubbed with a child plan to take care of the educational expenses of the insured's children. In case the policyholder passes away, his/her children get a lump sum benefit and the future insurance premium is taken care of by the insurer.

Payment Mode

All individuals of Indian origin, regardless of their citizenship status, are eligible to buy life insurance plan in India. While a buyer can purchase life insurance in India from another country without any issues, additional expenses can be incurred by him/her. For NRIs, the cost of conducting medical screening and sending the reports to the insured is not covered. The premium can be paid through the following modes:

• Remittal- Remittal of foreign currency.
• NRO Bank Account-For INR denominated plans issued to NRIs, NRO bank account can be used.
• NRE/ FCNR Bank Account-NRE/ FCNR bank account can be used for foreign currency denominated plans issued to NRIs.

When to Buy NRI Life Insurance?

Before an NRI get a life insurance, he/she must have a fixed income source. While buying a life insurance at a young age is easy and hassle-free, if an NRI doesn't act as an early bird and develops a pre-existing illness at the time of buying an NRI plan, he/she will have to pay an enhanced premium.

From Where to Get NRI Insurance?

From where should an NRI get insurance (i.e. from his country of residence or country of origin). Before an NRI makes up his mind, he/she should keep the following factors in mind.

• Cost Variation- The life Insurance premium might vary from one country to the other. How economical it is to buy life insurance in India or the country of residence, depends upon the company.
• Tax Benefit Variation- Taxation policies vary from one country to the other. For instance, in India, the total income from life insurance policies is tax-free, regardless of whether it is a death benefit or maturity benefit. In the USA, the principal amount is tax-free but the earned interest taxable.

What are the Eligibility Criteria for Buying NRI Plans?

Let's take a look at the eligibility criteria for NRIs purchasing a life insurance plan in India.

• Indian passport-The insurance buyer must have held an Indian passport in the past.
• Person of Indian Origin -The insurance buyer / his/her parents or grandparents must have been a citizen of India.
• Spouse-The insurance buyer must be a spouse of an Indian citizen.
• Valid Passport- The insurance buyer must hold a valid passport issued by the Indian government.

Common Life Insurance Myths

A myth is nothing but a statement that isn't backed up by facts and figures. Unfortunately, there are so many myths floating around in the insurance market that people have started believing them to be true. That being said, when a policyholder buys a life insurance plan, he/she shouldn't trust any information blindly.

How to Maintain a Life Insurance Plan?

It is easy and simple to maintain a life insurance plan. Here are the tips that can be helpful:

• Renewal Before Due Date- A policyholder must pay his/her life insurance policy premium and renew his/her plan regularly to eliminate any risk of a policy lapse. While sending renewal reminders is a courtesy of the insurance company, there is no legal obligation.

Note- In case a policy has lapsed, get in touch with the insurance provider to renew it.

• Check Plan Details- A policyholder must check the life insurance plan details and his/her basic information. In case there is an error that needs to be rectified, he/she can get in touch with the life insurance provider for the same.
• Nominee Details- In case a policyholder needs to change his/her nominee details, he/she can do it after the issuance of the life insurance policy.
  • Here is how to Get the Policy Details Changed:
    • Duly fill a form for changing the nominee and submit it.
    • In case of a minor nominee, an appointee is appointed to receive the claim amount.
• Safety of Policy Document- In case a policyholder loses his/her policy here is what to do:
  • Report it - The policyholder must report it to the insurance provider as soon as possible.
  • Duplicate Policy- After the completion of formalities, a duplicate policy will be issued to the policyholder.

Pros and Cons of Having Multiple Life Insurance Policies

Having multiple life insurance policies has its own pros and cons. As the insurance needs vary from person to person, it is important to evaluate the advantages and disadvantages of having multiple life insurance plans and then make an informed decision.

Pros of Having Multiple Life Insurance Plans

• One can purchase policies with levels of insurance coverage and policy term.
• The individual can avail more coverage and customize the plans accordingly in order to fulfill the short-term and long-term financial objectives.
• Instead of expanding an existing policy, the policyholder can get additional coverage as needed by investing in two or more life insurance policies with a better rate.
• One can purchase multiple life insurance plans from the same insurance provider and can qualify for a discount.

Cons of Having Multiple Life Insurance Plans

• It can be confusing and difficult to manage different policies especially if the policyholder has multiple insurers.
• Life insurance plans include different fees while purchasing. If an individual has multiple policies then they will be required to pay more fees.

Reasons Why You Should Not Cancel Your Life Insurance Policy

There are many individuals who think that it is not important to invest in life insurance plans. However, contrary to this, it is very important for every individual to have a life insurance plan as it provides financial safety to the family in case of an eventuality. Let's take a look at the reasons why one should not cancel the life insurance policy.

High Life Risk Coverage

One of the major advantages of investing in a life insurance policy is that it provides higher insurance coverage to the family of the insured against any type of unfortunate event. So, if the policyholder cancels the policy, they will lose the policy coverage and the financial benefits that come with a life insurance plan.

Financial Assistance

Life insurance plan works as a financial aid at the time of eventuality.  It provides financial assistance to the beneficiary of the policy as a lump sum payment in case of the unfortunate decease of the policyholder.

Better Returns

As compared to the other investment options, life insurance plans offer a better return on investment. This is because many life insurance policies also include the advantage of bonuses which lacks in other options of investment.

New Coverage Can be More Expensive

If the insured surrenders the life insurance plan then the coverage of the policy will lapse. In case, the policyholder requires purchasing the same coverage in the future then it will be more expensive as the premium rate of the policy increases with the increasing age. Thus, it is not advised to cancel the life insurance policy.

What is the Procedure for Cancelling a Life Insurance Policy?

There can be a number of reasons to cancel a life insurance plan. The reason could be a financial crisis or an urgent need for money. One can have any number of reasons, but irrespective of any reason, it is fairly easy to cancel a plan. The following process is a guide to this procedure:

Visit the official website of the life insurance company from where the life insurance policy was bought.

Irrespective of the fact that whether the life insurance is from a large national company or some regional insurance provider, visit the provider's official website in order to check the cancellation procedure of the life insurance policy. Also, look for the website on the internet using the name of the insurance provider.

Getting in touch with a Broker

Before proceeding with the life insurance policy cancellation, it is suggested to get hold of an experienced broker to clear all the doubts and check whether this is the right decision. It will help one in understanding whether this will reap good results.

Getting Hold of an Accountant

Canceling a life insurance policy can leave a door open for taxes implications. When the policyholder cancels the life insurance policy, the insurance provider sends them a cheque with a certain amount. This sum may or may not be eligible for tax exemptions. Hence, it is necessary to consult a seasoned tax guru as she/he can resolve all the queries about tax implications linked to the cancellation of a life insurance scheme.

Take Partial Withdrawal Plans into Consideration

If it is a whole life insurance policy, then partial withdrawal of sum assured is allowed without complete cancellation of the policy. With partial withdrawal, the policy will free up a certain sum of money that can be used immediately, and in the meantime, some money can still be left in the policy to cover the insured's family. Nevertheless, a partial withdrawal is like taking a loan against a life insurance policy and can have certain consequences.

Steps Involved:

• The policyholder should get in touch with the life insurance company and request for the policy cancellation.
• Typically, the company will offer various alternatives & insurance solutions to the policyholder.
• In case the policyholder is happy with offered alternatives, he/she won't have to cancel the life insurance policy.
• In case the policyholder wants to cancel the life insurance plan anyway, he/she needs to download the plan cancellation form the official website of the insurance provider.
• The policyholder must duly fill the policy cancellation form and attach/upload the required documents (if any).
• The company will initiate the life insurance policy cancellation process.

Note- The policyholder isn't entitled to any refunds if he/she cancel the plan after the cooling-off period.

Reason for Cancellation

Before a policyholder proceeds to cancel his/her life insurance plan, he/she must analyze the reason behind this cancellation. The decision to cancel a life insurance plan is a major one. When a plan is canceled, the insured loses the insurance coverage.

If a policyholder decides to cancel his/her life insurance plan because he/she has come across a better plan, this can be considered as a valid reason for cancellation.

Cancellation Refund

Every best life insurance plan comes with a grace period/cool-off period which enables the policyholder to assess his/her insurance expectations. It gives him/her the time to make sure that the life insurance plan is the best for him/her. In case a policyholder cancels his/her policy during the grace period, he/she will be offered a refund. Also, she/he won't have to pay any additional fee.

Impact of GST on Life Insurance

The Goods and Services Tax (GST) was slated to influence the prices of almost all the consumer products and services offered. GST was claimed to be the greatest indirect tax reform in India since independence. It was expected to have a positive impact on the Indian economy.

The service sector, at present, comprises 60% of the Gross Domestic Product (GDP). Taking this into consideration, the GST was likely to have a huge impact on the service sector. The life insurance industry also forms a part of the service sector, which, consequently, got greatly affected by the GST.

Life insurance is a sector which has a vast potential in the country due to the fiscal cushion that it offers to the people for taking care of their needs and requirements at various stages of life. Nevertheless, life insurance, at present, sees a very low penetration in the country. Taking this into consideration, it could be advantageous to not only create awareness but also boost its coverage and reach.

Life insurance services were taxed between the range of 1.5% and 15% before the implementation of GST. The rate of service tax that was applicable then was decided based on the type of the policy. In December 2015, Revenue Neutral Rate (RNR) report was published by the Chief Economic. This report was on GST Laws, according to which, a standard GST rate of 18% was decided for the insurance services.

The burden of indirect taxes was passed on to the end customer; the augmented 18% tax rate under the GST was likely to make life insurance policies more unreachable to a larger chunk of customers, which in turn, lowered the level of insurance penetration in India. Despite this, now the insurance penetration has witnessed a growth of 8% (CAGR) approximately.

In comparison to countries like Australia, Malaysia, Africa, Singapore, etc. where the government provides the life insurance benefit as a part of social security, imposing taxes on the insurance products and services deters many people from considering buying life cover for themselves and their dependents.

The Relationship Between the Life Insurance Business and GST:

The premiums of life insurance policy represent two most important components namely, risk coverage and savings. The service tax was imposed only on the premium component.

As per the rules of GST, the value of services on which the GST is imposed regarding life insurance industry shall be according to the following points:

• The gross premium is reduced by the allocated amount for savings or investments on behalf of the policyholder.
• When single premium annual policies are taken into consideration, the insured will be charged 10% of the single premium.
• In other cases, 25% of the premiums for the first year of the policy and 12.5% of the premiums in the forthcoming years will be imposed. For instance, if the premium of an endowment plan is Rs.100, then the 18% GST would be imposed on the 25% of the premiums (which will be Rs.25) the GST will be Rs.4.50.
• If the total premiums paid by the insured are towards the risk cover of life insurance, only 18% GST would be imposed on total premium.

Due to the increase in the percentage of GST, the overall impact of GST is the increased expenditure (premium + increased GST), when it comes to endowment plans and term life insurance.

The insured stands a chance to avail the benefits of the insurance companies get a green signal on the input tax credit benefit. Before the implementation of GST, it was unclear, since the center/state GST structure was very complex. However, after the implementation of GST, the new and existing insurance customers had to bear the updated price.

GST Rate: Before and After:

Common Jargons used in Life Insurance Policy

• Insured: The person buying the policy is referred to as the insured.
• Insurer: The insurance provider selling an insurance policy.
• Sum Assured: The total sum of money that is guaranteed to a person at the maturity of the life insurance plan is known as the sum assured. Bonuses are not included in the sum assured.
• Death Benefit: The payout received by the beneficiary or the nominee upon the unforeseen demise of the policyholder is called the death benefit.
• Accident Benefit: If the insured meets with an accident, his/her life insurance policy might have a clause covering all the expenses related to their accident such as hospitalization expenditure, medical expenses, etc.
• Rider: Often the insurance providers offer the adjoining features to their policies at an affordable fee. Such additional features enhance the value of one's life insurance policy and deliver additional benefits, which are referred to as riders.
• Claim Settlement Ratio: The ratio of the total number of claims that the insurance provider has paid to the nominated beneficiary of the policyholders in proportion to the overall number of claims they get from consumers. The other claims are generally either denied for reasons like impersonation, misrepresentation, fraud, etc.
• Free-look Period: If one is unsatisfied with his/her life insurance policy's terms and conditions, and wants to cancel the policy, one can do so during the free-look period without paying any penalties or fees.
• Bonus: The additional sum of money an individual receives during the term of the policy, or on the maturity of the life insurance policy, considering that s/he has paid all the premiums as required for a specific number of years, is referred to as the bonus.
• Moral Hazard: When an insured is involved in situations or events that could boost the risk of an insurance provider to incur extra costs on behalf of that individual, s/he is known as moral hazard.
• Lapsed Policy: If a policyholder fails to pay the premium on or prior to the due date, and doesn't pay the premium after the grace period as well, then the insurance provider ceases all the benefits provided by the insurance cover and abolishes it for the reason of non-payment. Such a policy is known as a lapsed policy.
• Reinstatement: If the insured does not make payments for the due premiums for any reason, and the insurance provider, consequently, decides to dismiss the life insurance policy, the insured will have a choice to renew the life cover, and this process to make a lapsed policy active again is termed as reinstatement.
• Convertible Life Insurance Policy: It permits the insured to convert his/her term life insurance policy to a permanent policy. Nevertheless, there will be a certain time limit for the consumer to make such conversions.
• Renewable Life Insurance Policy: The best Life insurance policies having this clause enable the nominated beneficiaries to increase the term of the policy for a certain period of time.
• Single Premium Life Insurance Policy: Single premium policy is one that covers the person for a specific period of time and guarantees payment to the nominee in case of the unforeseen demise of the insured, provided that the insured has paid lump sum amount as premium.
• Cash Value: If the life insurance plan gets terminated voluntarily prior to the maturity date, the insurance provider will pay the policyholder a specific amount known as the cash value.
• Vesting Age: The age of the policyholder at which the insurance provider starts giving pay-outs is known as the vesting age.
• Policy Term: The total duration for which the policyholder will be covered by the insurance provider is known as the policy term.
• Grace Period: If the insured could not pay the renewal premium towards his/her policy on time, the insurance provider gives them an extension in the number of days after the due date of premium payment. A grace period can be a period of 15 days, if the premium is paid monthly, and 30 days in case of the yearly mode of premium payment.
• Waiver of Premium: The policyholder has a responsibility to pay the premiums regularly. Waiver of premium is the rider that the insured can buy if he is seriously ill or disabled, and hence, is not able to pay the premiums. This feature makes sure that the insured continue receiving the benefits from the company even if he/she can't afford to pay the premiums.
• Premium Paying Term: The total duration for which the policyholder will be paying premiums to the provider is known as the premium payment term. These terms are generally same as that of the policy term.