Life Insurance

Life insurance is a contract between an insured and a life insurance company, where the insurance company pays a lump sum amount after a certain period or upon the death of the insured in exchange for the premium.

What is Life Insurance Policy?

A life insurance policy is an agreement between an insurance company & a policyholder that offers financial coverage under which the insurance company guarantees to pay a certain amount to the nominated beneficiary in the unfortunate event of the insured person demise during the term of life insurance plans. In exchange, the policyholder agrees to pay a predefined amount of money as premium either on a regular basis or as a single premium. If covered by the policy, coverage will be provided for critical illness as well.

Since it provides enhanced insurance coverage, it attracts an enhanced life insurance premium.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Online Life Insurance Plans

True to its name, online life insurance plans are available exclusively online. An online life insurance plan also offers death benefit in the form of a high sum assured at a low premium. Moreover, online life insurance plans also offer several tax benefits under Section 80C of the Income Tax Act, 1961.

What is a Life Insurance Premium?

A life insurance premium is a payment that is to be paid to enjoy the life insurance benefits. The life insurance premium is paid annually; however, the mode of premium payment can be selected from monthly or half-yearly also. This premium also helps to grow the cash value of life insurance.

The insurance company determines the premium payable by the policyholder to the insurance company. Having said that, the insurance buyer gets to select the term of the policy and the sum assured.

In order to calculate the sum assured of a life insurance policy, the insurer takes various factors such as your lifestyle, occupation, number of dependents, finances, sum assured etc. into consideration.

Note- There is no premium calculator that can calculate the worth of human life.

Top Life Insurance Plans in India

Listed below are the best life insurance policy plans:

Benefits of Life Insurance Plans

The perks of buying a life insurance policy are beyond protecting policyholder’s family in tough times. Undoubtedly, it is a necessity for a breadwinner to safeguard their dependents in case of their unfortunate and untimely demise, accident or physical disabilities that lead to a loss of income. Having said that, there is a long list of other benefits that make life insurance plans a must-have.

Sadly, most people are not aware of the many benefits offered by a life plan. All they care about are the death and disability benefits. However, there is plenty of other benefits offered by life policies such as maturity benefits, tax benefits etc.

Let's take a look at the benefits offered by life insurance plans:

• Acts as a Loan Collateral

  Till date, many people don't know that life policies can also be used as loan collateral. Based on the type of the life insurance policy and the surrender value, the policyholder can opt for a loan from a bank or NBFC (Non-Banking Financial Company) as per applicable terms and conditions.

  Loan Amount: Generally, the loan amount is a percentage of the surrender value of the life policy and it can go up to 90%. There are few companies that only allow for a loan up to 50 percent of the total premium amount paid by the policyholder.

• Online Payment Discount

  Most individuals are unaware of the online payment benefit (the payment mode chosen by an individual drastically affects the premium of a life insurance policy). As a matter of fact, an insurance company's administrative costs considerably go down when an individual opts to pay his premiums online.

  This is because there is no paperwork-related cost involved. Also, the life insurer is able to save a significant amount on the commission, which they pay to the agents for offline life insurance buying and renewing.

  Please Note- This discount varies from company to company.

• Discount as per the Opted Payment Periodicity

  Almost every life insurer offers various payment periodicities to its policyholders- annual, half-yearly, quarterly or monthly mode.

  If a policyholder chooses to pay the policy premium on an annual basis, the company can use it for investment purpose that automatically means more profits and benefits for the company.

  Once a policyholder chooses the payment periodicity, this discount is often already included in the premium rate charged by the life insurer.

• Taking Care of Business

  There are some life insurers that provide an option for policyholders who own a business. In the case of policyholder’s demise, their business partners can purchase the policyholder’s share without any hassles. In this scenario, the business partner will simply have to sign an agreement with the life insurer and the pay-out received after selling the policyholder's share will be given to their dependents.

  However, it's important to understand that the nominee or the dependents of the policyholder won’t get a stake in the company.

• Tax Benefits

  For paying a life policy premium, a policyholder is eligible for a tax rebate under Section 80C of the Income Tax Act 1961. Irrespective for oneself, their spouse or their children, the premium paid for parents and in-laws is exempted.

  This benefit is offered by all the life insurers - be it private sector life insurers or public sector life insurers.

  Additionally, the maturity benefit of life policies also qualifies for tax deductions under Section 10 (10D) of the Income Tax Act, 1961.

Types of Life Insurance Policies in India

Here are the details of the aforementioned life insurance plans:

• Term Insurance Plans

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

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

  Benefits of Term Insurance Plans

  • Death Benefit: The death benefit is paid as monthly payouts, a lump sum, or both.
    Please Note- No payout is paid in case the insured outlives the policy tenure.
  • Additional Riders: In order to enhance the life insurance coverage offered by a basic life policy, term plans come with various optional riders. Depending on their expectations, the policyholder can opt for the same.

• Unit Linked Insurance Plans

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

  The premium paid towards a ULIP is partly used as a risk-cover for life coverage 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. Based on that, the insurer invests the amount in the capital market as per the insured's preference.

  Benefits of ULIPs

  • Best of Both Worlds- It offers the benefits of life coverage 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

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

  An endowment policy is a combination of a life coverage plan and savings plan. It invests a particular amount in life coverage 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 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.

  Benefit 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 Plans

  True to its name, this type of life coverage plan offers a stipulated percentage of the assured sum. It 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 individuals 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).

  Benefit of Money Back Plans

  Accomplishment of Short -Term Financial Goals- It acts as a tool to accomplish short-term financial goals and 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 coverage as long as the insured lives. There are a few providers that offer life coverage up to 100 years of age. Contrary to the coverage offered by term plans, this plan offers extensive life insurance coverage.

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

• Whole Life ULIP

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

  Please 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

  • Coverage- It offers lifelong 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 any age limit with respect to the eligibility criteria.

• Child Plans

  A child plan acts as a tool to generate funds for the policyholder’s child. A child plan helps one build a corpus for their child that can be used for the child’s education and wedding. Generally, child plans either provide benefits as installments on an annual basis or a 1-time payout once the insured child is 18 years of age.

  In an unfortunate event of the untimely demise of the policyholder during the policy term, immediate premium payment is payable by the insurer. In such cases, some life insurance providers waive off future premiums but the plan continues till the opted policy term.

  Child Plan Benefits

  • Secured Future- Even if the parents of the insured child pass away, it ensures that the future of the insured child is safe and secure.
  • Financial Support- It helps parents accumulate funds for major events in their 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 their retirement. Typically, retirement plans provide benefits in the form of installments on an annual basis or a 1-time pay-out once insured is 60 years of age. In case the insured outlives the policy term, the plan offers vesting benefit. In case of the insured's demise, it offers the death benefit to the policy nominee.

  Note- In case of the insured's demise while the policy is active, the life insurer pays a pre-decided amount to insured's nominee.

  Retirement Plan Benefits

  • Corpus Generation- It helps the insured build a corpus for their 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 a payout.

Comparison of Different Types of Life Insurance Plans in India

Claim Settlement Ratio of Life Insurance Providers for 2018-19:

Disclaimer: Policybazaar does not rate, endorse or recommend any specific insurance provider or insurance product offered by any insurer.

Document Required for Buying Life Insurance Policy

Documentation stands for a compilation of documents that are used as evidence of the information.

Just like every other sector, insurance companies also need proofs before issuing a life insurance policy. The policy seeker is required to submit all the relevant documents in order to avail the policy. It goes without saying that the documents should be submitted 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 would be offered to the insured. In most of the cases, the life insurers offer a cover up to 20 times the proposer's annual income. The standard income proofs include:

  • Salary slips of last 3 to 6 months (depending on the insurer)
  • Income Tax Returns (ITR) of the 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 a certificate issued by CA.
  • Latest Form 16

• Address Proof

  Insurance companies would ask for address details of the applicant. The following documents can be used as address proof:

  • Voter ID card
  • Aadhaar Card
  • Saving account 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 following 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

  Apart from the KYC documents, here are some other documents that an applicant would have to submit at the time of buying life insurance coverage:

  • Insurance application or proposal form.
  • Policy declaration, which is necessary if someone other than the insured has filled the policy proposal form.
  • A final declaration 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 would be 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.
  • Policy proposal also includes a personal statement, which is attached to the declaration form. Any incorrect statement may lead to rejection of the application.

  Please Note:

  • As per the IRDA of India’s rules, after verifying everything, a copy of the proposal would be sent to the insured within 30 days of the completion of the formalities.
  • IRDA also states that the insurer must make a decision on the proposal within 15 days.
  • First Premium Receipt is proof 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 or Cooling-off Period in insurance terms.

  At the time of paying the annual premium upon policy renewal, the insured is provided with a premium receipt which is an important document for further reference.

How to File a Life Insurance Claim?

Filing a claim and getting the assured amount can be a cakewalk if all the necessary steps are taken care of. It is important to have the right approach to file a claim. Here's how nominees of the policyholder or policyholder can file a claim in India under the following scenarios:

• Upon the demise of the policyholder
• Upon maturity of the policy

How to File 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.

Share Important Details: The beneficiary or the claimant while lodging a claim with the life insurer needs to share all the important details like:

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

If the life insurance policy has been purchased offline, then the insurer would have provided 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 accidental or natural death, the beneficiary or the nominee needs to submit all the supporting documents to the life insurer as a part of the claim process.

The claim support team will verify the insurance documents and claim declaration. In some cases, they might ask the beneficiary to submit a few other documents.

Documents to be submitted

• Original copy of the insurance policy
• Duly filled claim form
• Death certificate of the policyholder
• Deeds of assignment, if any.
• Discharge form signed by the witnesses.
• Supplementary documents like post-mortem reports, hospital certificate, and doctor’s certificate (if required).
• The investigation report in case of police inquiries.

Note- If someone other than the nominee files the claim, the insurance company can ask for the legal title of succession.

Approval and Pay-out

• Once all the documents have been submitted, and the life insurer has verified it, the claim will be settled by the insurer.
• The life insurer can ask for the beneficiary's bank details - a canceled cheque or a copy of the bank account passbook, which must be attested by the bank authorities.
• For nominee's identity proof, a copy of passport, voter identity card, PAN card, Aadhaar card etc. needs to be submitted.
• Generally, the claim settlement process takes 30 days. Once 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 verification

How to file a Claim for the Maturity?

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

Here is a simple process to file a maturity claim with minimal paperwork.

When the policy is about to mature, the life insurer 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 policy maturity benefits are provided.

In case the policyholder has nominated another individual or entity for the life insurance policy, then the nominee must sign the discharge voucher to the insurer, in order to receive the claim amount.

Points to Remember

• This process is applicable only to the life plans eligible for maturity benefits like additional bonus, survival benefits, etc.
• In the event of the demise of the policyholder after the date of policy maturity, 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.
• At the time of buying a new life plan, the applicant must mention the details of previously purchased policy (if any). The insurance provider must be aware of the existing policy. Additionally, it 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.

Inclusions and Exclusions of a Life Insurance

What is covered under Life Insurance Plans?

Generally, the inclusions are mentioned in the policy copy. The life insurance experts recommend the insurance buyers to carefully go through the fine print of the policy copy.

What is Not Covered under Life Insurance Plans?

Though a life insurance policy offers financial cover against multiple eventualities, there are certain situations in which the insurance company doesn’t provide the life insurance coverage.

Here's a quick rundown of the some of the common exclusions of life plans:

• 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 factors that decide your premium.

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

  The insurance company will decide whether to accept or reject your application based on your lifestyle habits.

  Please Note- Make sure that you accurately declare 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 under life insurance coverage. The beneficiary of the policy cannot file a claim if the death of the policyholder takes place due to any such reason.

• Participating in Extreme Sports Activities

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

  However, there are some life insurers in India that have tried to fill the gap amid the increasing popularity of adventure sports/activities and offered life insurance coverage 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. For any damages caused due to negligence on the part of human beings, no coverage is provided.

• Loss of life due to HIV and STDs

  In case of the untimely death of the policyholder due to sexually transmitted diseases like HIV/AIDS, no life insurance coverage will be provided.

• 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 drug overdose, it will lead to rejection of the life insurance coverage claim.

  Therefore, you should be responsible. Else the dependent members of your family will not be provided with 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.

Life Insurance Riders & Their Importance

What are Life Insurance Riders?

These riders offer add-on benefits offered by the life insurers that help to enhance the base insurance coverage. However, without knowing the types of riders available in the market, one shouldn't randomly opt for the same just for the sake of increasing the cover amount of the life plan.

Choosing the right life insurance rider is as crucial as buying life insurance plan. After all, no one wants to regret an insurance decision. That's why one must take time and expert's advice before opting for a life insurance rider.

Types of Life Insurance Riders

Here are some of the rider options available for policyholders:

• Critical Illness Rider

  This rider benefit 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 covered by the company.

  The life insurer offers the rider benefits upon the diagnosis of the covered critical illness. Though many of the above listed critical illnesses may not cause immediate death, the treatment could cost a bomb. Under this rider, the insured can use the sum assured to pay for the treatment expenses. The only condition is that the policyholder will have to survive the waiting period.

  As no one can ensure 100 percent guarantee against a critical illness, this rider can be opted by:

  • Top-level officers working under extreme work stress
  • Chain-smokers
  • Someone leading an 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 will be terminated. In such cases, the insured wouldn't be offered any compensation. In such a situation, how will their family manage their finances without a regular source of income?

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

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

  While this rider can be opted along with critical illness and accidental total and permanent disability rider, the insured can opt for it separately. As uncertainties can't be predicted, one should consider buying this life insurance rider if they are a daily commuter or work on on-site civil work that involves physical work.

• 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. In many cases, the policyholder doesn’t pass away on-the-spot, so most of the insurance companies set a time period after the incident to extend the offered coverage.

  Let’s say, if the policyholder passes away after 100 days of the accident, the nominee will still receive the sum assured. That's why it is imperative to check the life insurance policy clause carefully at the time of opting for a rider.

  As accident can happen anywhere, anytime, everyone should ensure the financial future of their family. While anybody can opt for this rider, it is a must-buy for those who:

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

• Accidental Total and Permanent Disability Rider

  Due to total temporary or permanent disability in case of an accident, if the insured is unable to earn a daily income, this rider provides financial assistance to their family in the form of a monthly income. The rider benefit may vary plan to plan and it is offered for a pre-decided time period.

  For instance, some companies offer rider benefits for 5 years to 10 years from the occurrence of the accident. In case of the death of the insured during the policy term, the beneficiary would receive the outstanding sum assured amount.

  This rider is important to buy for the individuals who:

  • Commute and travel on a daily basis by bike, car, public transport, train, or commercial vehicle.
  • Do physical work in on-site civil work or factories or travel frequently for business.
  • 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 term rider offers extra coverage for death in addition to the base sum assured which is pre-determined by the insurer.
  • Hospital Cash Rider: Under this rider, 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 insurers for those policyholders who want coverage for expenses related to emergency hospitalization.
  • Surgical Care Rider: Under this rider, a lump sum amount is paid if the insured undergoes an unavoidable surgery in India. However, the rider benefit may vary plan to plan or severity of the surgery. This rider benefit can be opted by anyone who wants to cover the expenses for surgery in case of any eventualities. This helps in avoiding any out-of-pocket expenses that may burn a hole in one's pocket.

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