Life Insurance is a contract between an individual and an insurer, wherein the insurer guarantees to pay a certain sum of money (sum assured) in case of the insured individual’s death or at the end of a pre-determined policy term.
Approximately 22,500 people lose their lives each day in India. This essentially means that 940 people die each hour. While Life and Death are a parcel of life, the loss of a loved one can leave a void which might never be filled. A life insurance policy helps fill certain aspects of this void, ensuring that the financial health of the insured’s family is taken care of.
Life Insurance in India has yet to become popular among the masses, with the total insurance penetration in India being just 3.49% as per the Economic Survey 2018, with life insurance accounting for 2.72%. Non-life insurance accounts for 0.77%. Given these numbers it is easy to understand that a majority of our population is not covered, leaving millions of Indians unprotected.
A life insurance policy is a type of insurance that provides coverage against the unexpected death of the policyholder or after a set-period of time when the policy matures. In order to avail this protection, the insured pays a certain amount as premium towards maintaining the policy.
It is nothing but a safety net which provides financial security/protection against loss of life. The primary purpose of a life insurance policy is to protect the financial interests of the insured’s family.
There are 3 basic aspects related to life insurance, namely:
Online tracking of applications
Given the stress associated with our daily life, we often come across cases of people meeting an untimely end, often leaving entire families shattered after their demise. Here are three main reasons why one must consider investing in a life insurance plan.
It isn’t hard to understand how life insurance works, with insurers aiming to simplify the entire process to generate more interest in this product. The steps below elucidate how exactly life insurance works.
The policy will cease to exist when the death benefit is paid. Note that certain policies provide an option of cover to the spouse of the insured, wherein the policy will cease after the death of the spouse.
Purchasing a life insurance plan comes with a range of benefits, with the primary ones highlighted here.
Purchasing a life insurance plan comes with a range of benefits, with the primary ones highlighted here.
Given the amount of choice in the market, you might find yourself confused when it comes to deciding which type of life insurance policy you should purchase. Most leading life insurance firms offer a range of plans including term life plans, whole life plans, endowment plans, money back plans, ULIPs, etc. to customers. Any one of these policies might be the right choice for you based on your coverage needs, financial goals, and premium paying ability. A few key types of policies with their corresponding purpose is mentioned in the table below.
|Type of Policy||Purpose of Policy|
|Pure Term Insurance Policy||A term life insurance plan is the most basic and cheapest type of insurance policy that you can buy. These policies do not have a cash value attached to them, and thus only provide a death benefit. You should purchase a term life policy if you want to avail a life cover at an affordable cost.|
|Whole Life Policy||Whole life policies provide a life cover for the policyholder’s entire lifetime. They charge a level premium for the entire policy tenure. These policies offer a range of benefits to the policyholder and also accumulate a cash value over a period of time. You should purchase this type of a life insurance policy if you would like to have a life cover for a longer period of time.|
|Endowment Policy||Endowment plans provide a risk cover and a savings option to policy buyers. Thus, in addition to the risk cover, these policies provide a survival benefit which will be payable at the end of the policy tenure. An endowment plan is ideal for policy buyers who are looking for a protection cum savings option.|
|Money-Back Policy||Money-back policies provide regular payouts to the policyholder by way of survival benefits, in addition to the life cover and related benefits provided by the policy. Money-back policies can be purchased by individuals looking for liquidity in order to attain key milestones of their life.|
|Unit Linked Insurance Plan (ULIP)||Unit Linked Insurance Plans or ULIPs provide a risk cover against death to the policyholder and also allow policyholders to invest in certain funds and avail the returns. ULIPs are ideal for policy buyers who would like to invest in funds as per their appetite for risk and receive the corresponding returns.|
|Pension Plans||Pension plans, also known as Annuity plans and Retirement plan, provide financial security to policyholders after their retirement, by way of regular annuity payments. A pension plan is an ideal buy for individuals looking to secure the golden years of their lives.|
|Group Plans||Group life insurance plans provide a life cover to a large number people under one master policy. Such type of a scheme/plan can be purchased by a group of people seeking an insurance plan with similar benefits, such as employees of an organisation or affinity groups.|
A life insurance policy, in addition to providing the policyholder and his/her dependents financial security, can also help one save on tax payments. The various tax benefits offered by life insurance plans, under the Income Tax Act, 1961
Thus, with a life insurance policy, not only can you achieve your long-term financial goals and safeguard your dependents, but you can also save on tax every fiscal year.
|Life Insurance Company||Claims paid ratio|
|Max Life Insurance||98.26%|
|LIC of India||98.04%|
|Tata AIA Life Insurance||98%|
|ICICI Prudential Life Insurance||97.88%|
|HDFC Life Insurance||97.80%|
The table below lists the top 10 insurance companies in India based on the premiums collected by them.
|Insurer name||Premium amount|
|Life Insurance Corporation of India||Rs.3,17,333.46 crore|
|ICICI Pru Life||Rs.22,068.77 crore|
|HDFC Standard Life||Rs.23,564.41 crore|
|SBI Life||Rs.25,354.19 crore|
|Max Life||Rs.12,500.89 crore|
|Bajaj Allianz||Rs.7,578.37 crore|
|Aditya Birla Sun Life||Rs.2662.80 crore|
|Reliance Life||Rs.4,069.37 crore|
|Kotak Mahindra||Rs.6,598.67 crore|
|PNB MetLife||Rs.3,953.51 crore|
“The data listed above is as per the report released by IRDAI (2017-18).”
LIC continues to be the dominant name in the Indian insurance industry, with private players lagging behind in terms of premiums collected and lives covered. This, however, is changing, with a number of individuals opting for private insurers on account of their improved services and cheaper products.
The table below highlights the various aspects related to life insurance companies in India during 2017-18.
|Insurer Name||Claim settlement ratio (%)||Percentage of grievances solved||Solvency Ratio (for the quarter ending on 31/03/2018)||Assets Under Management (in crores) (as on 31/03/2018)|
|Aegon Life Insurance||95.67%||100%||2.32||2,145.39|
|Aviva Life Insurance||94.45%||100%||2.94||8,959.68|
|Bajaj Allianz Life Insurance||92.04%||99.48%||5.92||50,790.57|
|Bharti AXA Life Insurance||96.85%||100%||1.79||4,494.31|
|Aditya Birla Sun Life Insurance||96.38%||99.75%||2.14||36,626.45|
|Canara HSBC Oriental Bank of Commerce Life Insurance||95.22%||99.70%||3.82||12,686.09|
|DHFL Pramerica Life Insurance||96.62%||99.75%||5.52||2,635.56|
|Edelweiss Tokio Life Insurance||95.24%||100%||2.19||3,611.06|
|Exide Life Insurance||96.81%||100%||2.07||12,256.36|
|Future Generali India Life Insurance||93.11%||100%||2.09||3,241.71|
|HDFC Standard Life Insurance||97.80%||99.85%||1.92||1,05,976.02|
|ICICI Prudential Life Insurance||97.88%||99.97%||2.52||1,36,239.05|
|IDBI Federal Life Insurance||91.99%||100%||3.71||7,276.54|
|IndiaFirst Life Insurance||89.83%||99.86%||2.07||12,377.78|
|Kotak Mahindra Life Insurance||93.72%||99.29%||3.05||24,677.40|
|Max Life Insurance||98.26%||100%||2.75||51,855.01|
|PNB Met Life Insurance||91.12%||98.32%||2.02||17,237.54|
|Reliance Nippon Life Insurance||95.17%||99.94%||2.66||18,912.29|
|Sahara India Life Insurance||82.74%||87.06%||9.02||1,281.39|
|SBI Life Insurance||96.76%||100%||2.04||1,15,171.53|
|Shriram Life Insurance||80.23%||99.75%||2.06||3,497.42|
|Star Union Dai-ichi Life Insurance||92.26%%||100%||2.78||6,902.30|
|Tata AIA Life Insurance||98.00%||100%||2.93||23,477.95|
Claim settlement ratio (CSR) – This is the ratio of the number of claims settled by the insurer to the number of claims it receives in a particular year. It highlights what percentage of claims have been paid. A high claim settlement ratio indicates that the insurer is more likely to settle a legitimate claim.
CSR = No. of claims approved/No. of claims received
It is a smart option to choose an insurer with a high CSR. As per the data released by IRDA for 2015-16, LIC has the best claim settlement ratio in the country, followed by Max Life, Tata AIA, and ICICI Prudential Life respectively.
Choosing an insurer with a low CSR could jeopardise the chances of a claim being honoured, resulting in trauma for the family of the insured.
Grievances solved ratio (GSR) – This is the ratio of the number of grievances solved by an insurer to the number of grievances received by it in a particular year. This reflects the service provided by the company, with it offering a peek into the how efficient the insurer is when it comes to sorting any problems. A number of insurance companies have a 100% GSR, highlighting their attention to customer issues.
Solvency ratio – There have been instances in the past where insurance companies went bankrupt, leaving thousands of customers in a bind. Governments have had to bail out such insurers, resulting in losses to the tune of billions to the exchequer.
In a bid to ensure that this doesn’t repeat, insurance companies are monitored regularly, with the IRDA checking their solvency ratio. This is nothing but the ratio of the assets of an insurance company with respect to its liabilities. It highlights the ability of an insurer to pay long-term debt.
Insurers with a solvency ratio of under 1.50 are closely monitored, with a high solvency ratio preferred. DHFL Pramerica has the highest solvency ratio amongst Indian insurance companies during 2015-16, with LIC having the lowest.
Given the stress associated with our daily life, we often come across cases of people meeting an untimely end, often leaving entire families shattered after their demise. Here are three main reasons why one must consider investing in a life insurance plan.
Insurance providers require a few basic documents in order to process an application. These include:
|ID proof||Most insurers insist on a government approved photo ID proof as part of their KYC process. This could be a passport, driving license, Aadhar, etc|
|Address proof||This could be a rental agreement, utility bill, voter ID card, etc. The insurance company will use this address for all communication associated to the policy.|
|Age proof||An individual is expected to provide proof of his/her age. As stated earlier, the age of an applicant has a huge bearing on the premium. Accepted documents include PAN card, Aadhar, driving license, Voter ID, etc.|
|Proof of income||The proof of income is required to check whether an individual can afford the premium for a particular sum assured. One could submit either their payslip, bank account summary, Form 16, or their IT return as proof.|
|Recent photograph||A recent passport size photograph is needed in some cases.|
|Medical certificate||Individuals over a certain age might be asked to undergo medical tests. A medical certificate will be needed in such cases. The certificate should be issued by competent doctors. Each applicant might not be asked to undergo medical tests, with this varying from case to case.|
*Note that an insurer could ask for other documents in order to process an application. These could be related to the nominee/beneficiary.*
Cost is one of the major factors people consider when looking for a new life insurance policy. Considering the range of policies available in the market, people compare the cost of these plans before making a final decision. The premium of a life insurance policy is influenced by various factors such as age, chosen sum assured, lifestyle habits, health condition, etc. It is a time-consuming affair to contact every insurer with these details and get a quote for your desired plan. Besides most companies have different products in their lineup to choose from. This is where a premium calculator comes in handy.
A premium calculator is a simple tool offered by most life insurance companies. These calculators can be accessed simply by visiting the official website of the insurer. You may also use the premium calculators offered by third-party aggregators like Bankbazaar to compare the different policies offered by various insurers. With this tool, you can calculate the premium of a specific plan available in the market and make an informed decision based on that. This main purpose of this calculator is to compare and filter out the policies before even contacting the insurance company.
How to use life insurance premium calculator
The life insurance companies in the market have their own versions of life insurance premium calculators based on the policies they offer. Though there are some minor differences among the life insurance premium calculators available in the market, they more or less function the same way when it comes to seeking inputs and giving the output.
Here is a step-by-step instruction on how to access the premium calculator offered by the country’s largest life insurance company LIC:
When you calculate the premium using the above-mentioned method, you will get detailed information about your half-yearly, quarterly, and monthly premiums for the chosen policy. Since LIC offers a diverse range of plans including term plans, ULIPs, endowment plans, retirement plans, etc., you may check the premium amount of these plans and choose the best one that fits within your budget.
The exact procedure for calculating the premium may differ from one insurer to another. For instance, the premium calculator of ICICI Prudential can be used in the following ways:
The premium calculators offered by other companies follow a similar procedure. All you have to do is visit the official website of these insurers and locate the premium calculator. If you visit the website of a third-party aggregator, you will be asked to enter your personal details and smoking habits. Based on the information entered, you will be offered a list of plans from various insurers in the market.
When it comes to life insurance, term insurance plans are the cheapest ones since there is no maturity benefit involved here. You may also use the premium calculators for calculating the premiums of various endowment policies and ULIPs before choosing your desired plan.
Paying the premium for a life insurance plan is no longer a hassle, for insurers provide an option to pay this amount online. Almost all insurance companies in India are equipped to handle online payments, with a few even providing incentives to pay the sum virtually.
Doing this is advantageous not only to the insurer, but also helps the policyholder save time and effort. Typically, this is a five-step process, which takes no more than a few minutes.
Filing a life insurance claim is a simple process. The need for a claim can arise in two circumstances, namely on death of insured or on maturity of the policy.
An insurer can ask for additional details in certain cases. These could include a request for the certificate from the hospital, a medical certificate, a letter from the employer, etc.
The insurer will pay the amount to the policyholder once the policy matures. In cases where the policy is assigned to a third person or an organisation, the amount will be paid directly to said assignee.
A life insurance policy isn’t a one size fit all. These policies should meet individual requirements, and given the various options available it is possible to get confused. The table below showcases the basic differences between the six insurance policy types.
|Insurance type||Premium||Cover duration||Maturity Benefit||Death Benefit||Ideal for|
|Term Insurance||Cheapest||Entire term chosen||Not applicable||Paid if death occurs during policy term||Individuals looking for protection for specified period of time only|
|ULIPs||Amount varies based on sum assured – More expensive than Term Insurance||Equivalent to policy term||Payable (depends on policy chosen)||Paid if death occurs during policy term||Individuals looking to get a return on their investment. Serves as investment plus insurance|
|Endowment||High||Equivalent to policy term||Paid on completion of policy term||Paid if death occurs during policy term||Individuals looking to get a lump sum amount at a future date. Serves as insurance plus savings|
|Whole Life||The premium is higher than other plans||Entire lifetime of individual/specified period||Payable||Paid when death occurs||Individuals looking to protect the well-being of their loved ones|
|Pension||Single premium||Till demise of policyholder||NA||Payable on death||Individuals looking for a regular source of income after retirement|
|Money Back||Varies based on sum assured||Policy period||Regular amount is paid until maturity||Payable on death||Individuals looking for liquidity|
A group life insurance is a type of policy that provides protection for a group of members under a single policy. Group policies are typically bought by employers to provide coverage for their employees. In addition to employees of an organisation, other members of a group including business groups, housing societies, customers of a bank, etc. can also avail group life insurance coverage. Similar to individual life insurance plans, group life insurance plans come in different forms.
Some of the common types of group life insurance policies available are as follows:
Some of the notable features of group life insurance are listed below:
Group life insurance coverage provides the following advantages to policyholders:
While group life insurance offers various benefits to policyholders, it also comes with its own set of limitations. Some of the limitations of group life insurance are given as follows:
Life insurance, in its current avatar is based on a number of principles. These are modified and adapted to the market, ensuring that insurance companies make a profit, while offering security to insured individuals.
One can say that there are four major principles applied in India, with these being:
For example, Mr. Jay decides to purchase an insurance plan for his mother. The life assured in this case is his mother, while the policyholder is Jay. In case Jay decided to purchase a policy for his neighbour’s mother the insurance company would deny it as there is no insurable interest in this case.
This is a question most of us end up asking. The insurance cover one needs depends on a number of factors and the answer to this question might not be universal. However, there are a few basic aspects which should be taken into account while choosing the insured amount.
For example, an individual who earns Rs.10 lakh per year has annual expenses to the tune of Rs.5 lakh. These include the car loan EMI, home loan repayment, school fees, etc. The cover in this case should ideally be around Rs.75 lakh.
In case there are other investments/savings, one can choose a lower sum assured. If there is no other investment, the cover taken should be on the higher side.
Individuals who are unsure of the cover they require can approach agents/use online calculators to determine an amount which might be sufficient for them.
The answer to this question goes beyond a yes or no, for there is no set age bracket which is considered the best period to invest in life insurance. However, there are a few key parameters which can help one determine the right time to buy it.
Age – The younger an individual is, the cheaper an insurance plan will be. Most youngsters refrain from purchasing a policy, thinking that they do not require it immediately. This, however, might not be the smartest move, for the cost of a life insurance plan increases each year. Statistically speaking, there is an 8-10% rise in the premium amount every year. Simply put, delaying the purchase of a life insurance plan can become an expensive proposition.
We can take the example of Jay to understand how this works. Jay, currently aged 30 years checks the cost of an insurance plan for Rs.10 lakh. The premium works up to around Rs.27,000 per year. He chooses to forego this purchase, deciding to wait instead. At age 50, he considers the same policy. The premium at this age is more than double the premium he was expected to pay when he was 30 years old.
Insurers charge a higher amount with increasing age. A smart option is to buy the policy at a young age. This enables one to enjoy the benefits of the policy without having to pay an exorbitant amount.
Given these points, it is safe to say that the best time to buy a life insurance plan is NOW. Delaying a purchase provides no added benefits. Irrespective of the position one is in currently, investing in a good policy can offer security and stability, in addition to savings.
With it close to impossible to predict life, it would be a smart option to consider the option of a life insurance plan immediately.
Understanding the life cycle of life insurance is not complicated, for it is visible around us. One can essentially break this cycle into four different stages, corresponding to different stages in an individual’s life.
We could take the example of Rakesh to understand the life cycle of life insurance. Born into a middle-class family, Rakesh had a good upbringing. At age 21, he completes his formal education and begins work. Until now he had no life insurance plan. Given the fact that he is independent, he chooses not to buy a policy immediately.
At age 25, he decides to get married. At age 27, he takes a home loan to buy a house. His responsibilities have now increased and he chooses to invest in a term insurance plan with a tenure of 25 years. Within the next few years he becomes a father, with added financial obligations. He increases the cover under his plan to meet them.
At age 52, his children are grown up and are on the verge of completing their education. His home loan is cleared and his financial obligations have reduced. The term plan is about to expire but he still feels the need to provide for his wife. He now chooses to invest in a whole life policy, ensuring that he is protected for as long as he lives.
A number of us are overwhelmed by the terms associated with insurance. Failing to understand these terms can dilute the value of a policy, often leading to confusion during crucial moments. While we might not think of them as important, getting acquainted with commonly used terms can help us enjoy all the benefits provided by a policy. Additionally, one can also be rest assured that they will not be taken for a ride by the insurance provider.
Yes, it is extremely important to compare the different life insurance plans offered before one decides to buy them online. Comparison becomes even more important when everything is being done online, for one might not have the help of experts.
Traditionally, insurance agents would explain a plan before the purchase was completed. The virtual world, however, might not always come with assistance.
With hundreds of plans available it is imperative that one searches and compares the different features of each plan, ensuring that the selected plan suits the personal requirements of the individual. There have been instances of people purchasing a policy without comparing them which have resulted in problems during the claims process.
Almost all insurers have a presence online, with it easy to find details about their products. Not only does this help save time and effort (when compared to offline comparison), it can also help one get a better deal on the premium amount.
Reviews of products and services by people who have invested in them can be an added bonus, offering an insight into what one could expect.
While one can go ahead and buy a policy without comparing it, a smarter option would be to check all other alternatives, enabling one to get the best product in the market.
Riders are add-on covers taken in addition to a base life insurance cover. The main purpose of buying a rider cover is to enhance the coverage offered by the base cover. In other words, riders provide coverage for things that are not primarily covered in the regular insurance policy. One of the advantages of having riders is that policyholders can customise their policies based on their specific requirements. Policyholders may choose multiple rider covers by paying additional premiums for those covers.
Some of the common riders available with life insurance policies are as follows:
Accidental death/disability benefit
This rider protects policyholders from the damages sustained from an accident. In case of accidental death of the policyholder, the benefit offered under this add-on cover shall be provided to the nominee. This cover also has provisions for different kinds of disabilities including permanent total disability, temporary total disability, permanent partial disability, etc. In case of disabilities, compensation will be provided to the policyholder based on the extent of disability suffered.
Term assurance rider
This rider is offered alongside various endowment policies and ULIPs. Similar to a term cover, this provides additional coverage (equivalent to the base sum assured amount) in case of the premature death of the policyholder within the policy term. This cover is useful if the policyholder wants to boost the death benefit of his/her insurance plan at an affordable price.
Critical illness rider
In case of the first diagnosis of any of the named critical illness, this rider cover pays lump sum payment to the extent of the additional sum assured amount. Some of the common life-threatening conditions covered under this rider include cancer, stroke, kidney ailments, heart attack, major organ transplant, etc. The number of critical illnesses covered may vary from one company to another.
Accelerated death benefit rider
This rider works more or less similar to a critical illness cover. Here, the insured person may get part of the sum insured amount in advance following the diagnosis of life-threatening conditions such as cancer, AIDS, stroke, etc. This lump sum advance amount obtained from the insurer can be used for treatment of the disease. This one-time benefit can also be used to supplement the living expenses of the insured person.
Waiver of premium rider
Upon purchase of this rider, the future premiums of life insurance will be waived following the occurrence of any of the named contingencies including death and disability. For instance, if the parent of a child covered under a child plan dies during a policy term, the coverage will remain active through the policy term but the future premiums can be waived. Similar benefit may also be applied following the disability of the policyholder within the policy term.
Spouse insurance cover
This rider provides additional coverage for the primary policyholder without the need for him/her to purchase a separate policy. This cover is ideal for couples who wish to save money on their insurance premiums.
Surgical assistance benefit
In case of a major surgery, policyholders can receive additional financial support by taking this cover. Hospitalisation expenses that do not require surgery are not covered under this rider policy. Also, pre-existing conditions are not covered under this rider. Policyholders may have to check the policy document for the specific conditions that may apply to this rider policy.
The rider covers available along with a life insurance plan may vary from one insurer to another. It may not be completely possible to anticipate the occurrence of any of the events mentioned above. However, policyholders can pick their riders based on various factors such as age, family health history, existing health condition, etc.
Hospital cash rider
This rider ensures that the policyholder is paid a fixed amount every day for non-medical expenses in the case of hospitalisation.
As an individual, you may tend to double check things in order to eliminate risks. You might have the same thought process when purchasing insurance policies. Having a life insurance policy means that you are ensuring that the future of your loved ones is safe and secure in case something happens to you and you are not around for your loved ones. Hence, you might think that having more than one life insurance policy might be a very good idea so that you can have the surety that your loved ones are financially covered even in your absence.
The insurance policy can never heal the pain of your absence that your family will feel, but it will ensure that they are financially covered and not compromising on their dreams. In case something happens to you, the nominee receives a lump-sum amount called the death benefit which allows your family members to take care of their day-to-day needs.
There are various types of insurance policies that you can avail for yourself. It is important that before you purchase any type of insurance product for yourself, you properly research and compare various plans and after evaluating your family’s needs you purchase a plan that you feel is suitable for you. There are primarily two types of insurance products that you can purchase for yourself - term insurance and whole life insurance. A term insurance plan is a pure vanilla insurance product which provides you with a protective cover. In case of your death, the nominee receives a lump-sum amount called the death benefit and the plan ceases to exist. Whole life insurance provides coverage for life and there are various subcategories of such types of plans such as universal life insurance, traditional whole life, variable life insurance, variable universal life insurance etc.
It is also important to note that unlike whole life insurance, term insurance does not consist of any cash component. Hence, the premiums are lower and term insurance is extremely cheap and affordable in nature. You can choose the period for which you will require coverage and one of the reasons why term insurance is probably the best insurance product to avail is that it provides large coverage for a very affordable premium.
If you are looking to purchase multiple life insurance policies, then it is important to understand its pros and cons and based on it decide whether you require more than one insurance policy or not.
Simply having a single insurance policy may not suffice for you. Therefore, it is recommended that you purchase more than one insurance policies that provide you coverage and ensures that the future of your loved ones is completely safe and secure. It is also not enough to just have only life insurance policy, and since the medical inflation is on a rise and cost of treatment for various health conditions is expected to become more expensive, it is thus important that you have a health insurance policy as well. If you have elder people in your house then you must insure them by purchasing a mediclaim policy as well. One of the benefits of having all these insurance plans is that the premiums you pay are exempted from being taxed under Section 80C of the Income Tax Act, 1961.
It is recommended that you treat insurance policies purely as products that provide you cover and don’t look at it from an investment point of view. Though having insurance policies means that you will be able to enjoy certain tax benefits, you will also have to do away with a major chunk of your savings. Having multiple insurance policies means that you will have to remember the premium payment dates for each of them and thus managing all your policies may become difficult provided that you also need to have an understanding of your insurance plans. No insurance policy comes for free and thus you will have to pay a lump-sum as premiums for each of your plan, which might take a toll on your pocket. Also, having too many insurance policies means that there might be a lot of paperwork involved as well. It is recommended that you do not purchase more than one term insurance policy for the sake of getting the extra death benefit. Since no term insurance plan is designed to have any cash component, you will not receive any benefits if you survive and the policy term comes to an end.
Life insurance, in the end, is designed to ensure that you lead a tension free life and hence it should not be a burden on you from a financial point of view. Hence, you must choose an insurance plan which not only provides adequate cover to your family but also do not put you under any type of financial burden. It is also important to understand that your family will enjoy the benefits of an insurance policy only after your death and you will not be directly enjoying them. However, in the end, having a term insurance plan is necessary and you must research, compare and then purchase a suitable insurance policy for yourself.
There are various reasons why you should not cancel your life insurance policy. Some of the reasons are:
Hence, these are some of the major reasons why you should not be cancelling your insurance plan. It is important that you properly research and compare various plans before settling down for the plan which you feel will be suitable for you. You must also take care of a financial advisor so that you are completely sure about the insurance plan, and what you are set to receive so that you do not have to cancel the plan at any given point in time. Patience is the key and you must stay invested in your policy for a considerable period of time before you start receiving its benefits. Purchasing insurance is one of the best investments you can make as you secure the future of your loved ones and you must invest in it for a considerable period of time in order to reap the benefits.
Investing in a life insurance plan results in a partnership between the insurer and the insured. Doing justice to both can be hard, but keeping these do’s and don’ts in mind can help one enjoy all benefits to the max.
|While buying the policy||
|After buying the policy||
|In case of loss of policy||
|In case of a claim||
A study done by the Environmental Protection Agency in the USA estimated the value of each life to be around $9.1 million, or just around Rs.57 crore. This, however, might not be the actual amount each individual is worth, for there are a number of factors which can change this value.
Similar studies done in the United States have estimated the cost of a life insurance plan for a healthy 30 year old male to be around $150 for a cover of $250,000, with the policy period being 20 years.
This amount, however, is not universal, for an insurance plan is designed to cater to an individual, with personal traits and habits influencing the premium.
In India, insurance companies determine the premium for a particular plan based on four main criteria:
We can understand how these parameters work by using the example of Mr. Jay.
Jay, who is currently aged 35 years invests in a term life insurance plan. He chooses a 30 year term and opts for a sum assured of Rs.50 lakh. As a smoker his premium amount comes up to around Rs.14,000 per year. If he were a non-smoker he would have to pay an annual premium of around Rs.8,600 for the same term and sum assured.
Now, if he had chosen to buy the same policy when he was 25 years old, the annual premium amount would be around Rs.7,500 (if he was a smoker at that age). If he refrained from smoking the premium would be just around Rs.5,000 per year.
From this, we can see how the lifestyle and age can impact the premium amount.
Similarly, if he opted for a sum assured of Rs.1 crore the premium would increase.
The table below highlights how the premium amount varies under different conditions:
|Age||Smoker (Y/N)||Sum Assured||Annual Premium|
|25 years||Yes||Rs.50 lakh||Rs.7,500 for male Rs.6,900 for female|
|25 years||No||Rs.50 lakh||Rs.5,000 for male Rs.4,800 for female|
|40 years||Yes||Rs.50 lakh||Rs.20,500 for male Rs.17,500 for female|
|40 years||No||Rs.50 lakh||Rs.13,000 for male Rs.11,000 for female|
The gender of the individual also has a bearing on the sum assured, with females paying a lower amount compared to males.
Note: The premium amounts mentioned in the example are indicative. Different insurers could charge a different amount.
Insurance companies charge a certain amount as premium to provide cover under a policy. This premium is computed after taking a number of factors into consideration. Probability plays a big role in determining the premium amount, with insurers looking at the lifestyle, medical history, and age of the applicant before deciding the premium.
While insurance companies hire expert statisticians to look into the process and come up with the premium, a regular individual can check the premium amount by using different online tools.
Most insurers have a premium calculator which showcases the premium amount for different permutations and combinations. Alternately, one can also use third-party website tools to compute the premium. One will have to enter details like their age, the term of the plan, the sum assured they wish to avail, the premium payment frequency, add-ons, etc. Once they enter these values into the premium calculator they will be provided the premium amount for the chosen variables.
Higher the chances of a claim being made higher is the premium amount.
Insurance companies charge a certain amount as premium to provide cover under a policy. This premium is computed after taking a number of factors into consideration. Probability plays a big role in determining the premium amount, with insurers looking at the lifestyle, medical history, and age of the applicant before deciding the premium.
While insurance companies hire expert statisticians to look into the process and come up with the premium, a regular individual can check the premium amount by using different online tools.
Most insurers have a premium calculator which showcases the premium amount for different permutations and combinations. Alternately, one can also use third-party website tools to compute the premium. One will have to enter details like their age, the term of the plan, the sum assured they wish to avail, the premium payment frequency, add-ons, etc. Once they enter these values into the premium calculator they will be provided the premium amount for the chosen variables.
Higher the chances of a claim being made higher is the premium amount.
A life insurance plan can be an expensive proposition, especially when one opts for it at a later stage in life. Paying a sum regularly can be draining on one’s finances. While there are no alternatives when it comes to paying the amount, insurers do offer discounts in certain cases.
Note: The rebate offered can vary and is at the discretion of the insurer.
The Goods and Services Tax has changed the way India does business. Effective from the first of July 2017, it has had an impact on the price of multiple products and services. The insurance industry also falls under the ambit of GST, with several changes implemented by insurers across the country. Purchasing and maintaining an insurance plan has now become costlier, with the table below highlighting the changes post GST implementation.
|Product/Service||Old service tax rate||New rate post GST implementation|
|Premium for Annuity Plans (single premium)||1.50%||1.80%|
In addition to the aforementioned changes, insurers will also charge GST on the interest which is typically charged when premiums are delayed.
Service tax exemptions which were previously accorded to certain plans/schemes will continue to be effective even after GST, with these provided in the case of the following plans:
A life insurance policy is the best way to protect a family’s financial security following the untimely death of the primary earner. In most cases, the settlement amount offered by a life insurance company will come in handy during various situations such as managing the family’s living expenses, children’s higher education, children’s marriage, etc. However, a life insurance policy may not provide this support to policyholders on all occasions. There are certain general exclusions for which the company is not liable to provide any settlement to policyholders.
If the policyholder dies due to any of the following reasons, the company has no legal liability to provide any settlement to his/her family:
The list given above provides some of the general exclusions applicable to life insurance policies available in the market. In addition to this, some companies may also put forth some additional exclusions for their policyholders. Before you sign up for a policy, you must carefully read the policy documents to know the list of exclusions that are not covered by your insurer. If you have any specific doubts regarding the exclusions that may be applicable to you, you may contact the insurer directly through their customer service department and check it out. You may also visit the branch office to get detailed information about the exclusions that may be applicable.
A variable life insurance policy is a type of permanent life insurance that has a cash value component in addition to the protection component. This cash value component functions similar to mutual funds. The cash value of the policy will be invested in various sub-accounts to generate returns. In simple terms, variable life insurance has the attributes of both high returns as well as high risks. The Insurance Regulatory and Development Authority of India (IRDAI) has come up with a proposal last month to simplify the attributes of variable insurance products (VIPs).
Variable life insurance combines the benefit of both insurance protection as well as investment returns. The performance of variable life insurance can be defined as follows:
Variable life insurance works similar to both ULIPs and traditional life insurance plans. The premium costs are clearly defined at the time of purchase of the policy. The premium you pay for the policy is invested in both a term life component and an investment component. The cash value component of the policy will fluctuate within the policy term. As the cash value of the policy increases, the term insurance component of the policy will decline. At one point, the entire death benefit of the policy will only have the cash value component. If the policy is a participating one, the bonus amount declared by the insurer every year will also get accumulated in the policy. The overall value of the policy will be a combination of all these factors.
Some of the key benefits of variable life insurance policies are listed as follows:
Variable life insurance comes with a lot of limitations. Due to these limitations, variable insurance products are not popular among life insurers in India. Since the products are complicated, life insurers mostly stick to traditional plans and ULIPs for the Indian market. Some of the downsides of variable life insurance are listed as follows:
The new proposal made by IRDAI has simplified the terms and conditions of variable insurance products. As per the proposal, insurers have no need to declare any a minimum floor rate on these products. They also don’t have to maintain any notional accounts for the investments made by policyholders. The proposal has also eliminated the need to declare additional returns for non-par products. With these relaxations, experts expect that variable insurance products could make a comeback to the industry. The higher transparency offered by variable insurance products over other traditional plans make it a worthy investment.
It is a dream for any person including you to own a house of your own. If you are a young professional who as just started out, one of the best ways that you can realise your dream of buying a house for yourself is by availing a home loan. Today it is easy to get a home loan as many lenders offer them at a very affordable rate. However, getting a home loan is a huge financial responsibility, and in case something happens to you, your family would come under huge financial trauma. Hence, it is important to be prepared by purchasing a proper life insurance policy.
When a lender gives you a home loan, there are certain risks involved from which they seek protection. Hence, the bank that lends you money as a home loan asks for a downpayment of 20% of the total value of the property. The default risk is low if you use your own funds to make the down payment. In case you falter and is unable to pay back the default, the lender can take over the property in order to recover their losses. Repayment of the home loan is a long-term commitment and hence bank do consider your repayment capacity before they offer you a loan. Hence, the payments that you will make on a monthly basis will be made in such a way that the installment is within 50% of the total take-home income. This ensures that you are able to make monthly installments on time and without having to go through any financial problems over a course of your loan term.
One of the best insurance products that you can use to protect yourself against loans is by availing a term insurance plan for yourself. The reason term insurance is recommended since it is cheap and the benefits offered are multiple times higher as compared to the benefits given by other life insurance products. In case of your untimely death, the nominee receives a lump-sum amount called the death benefit which can help in paying off the loan amount. Thus, it is always recommended that the sum assured chosen by you should be high so that not only does it cover the loan amount but also helps in taking care of the other day to day needs of your family. You must also ensure that your policy term is higher than your loan repayment term.
Various life insurance companies in India sell a type of cover called the loan protector covers. These types of covers help in taking care of the outstanding loans that you may have to repay in case of your untimely death. These type of covers are generally sold as a single premium plan which ultimately takes care of the loan amount in case something happens to you. These type of covers are more expensive as compared to a normal term insurance cover.
Term insurance covers and loan protector cover are two different products which help in taking care of the outstanding loan amount in their own manner. However, it is important to know the difference between the two types of cover and how they provide coverage against home loan.
|Term insurance cover||Loan protector cover|
|This can be purchased either as a single premium cover or an annual premium cover.||This can be purchased as a single cover for a specific period of time depending on the duration of your home loan.|
|This is a pure insurance cover which provides a lump-sum amount called the death benefit in case of your death.||This type of cover only pays the loan amount in case of your untimely death. Nobody is paid any additional compensation.|
|The benefit remains unchanged throughout the term||The benefit continues to deplete as the loan amount gets covered over a period of time.|
|The benefit is only paid in case of your untimely death.||This type of benefit is payable against your death or if you suffer from any form of permanent disability.|
|This type of cover remains active throughout the policy term as long as you are paying your premiums.||This type of cover ceases to exist once the loan is paid completely.|
|Your nominee will receive the benefits even if you die naturally.||This type of cover is payable only if you die due to an accident or due to some form of critical illness.|
|This type of cover ceases to exist at the end of the chosen term.||This type of cover also ceases to exist at the end of the chosen term.|
If you are the sole earning member in your family and have availed a home loan, it is your duty to ensure that your family members are well protected from the burden of liabilities related to your home loan. Today various insurance company offers loan protection cover, as well as many lenders who offer the same in order to protect their investments. However, it is suggested that purchasing a term insurance plan is the best way to go forward as not only does it provides benefit in case of your untimely death so that the financial liabilities can be taken care of, but also allows your loved ones to take care of their day to day needs even in your permanent absence. However, in order for this to happen, your sum assured should be more than your outstanding loan amount.
Most financial experts advise people to take life insurance as early as possible. When you purchase a life insurance policy at a young age, you can get access to high-value coverage at an affordable price. While the same cannot be said for senior citizens, there are still plenty of options available for them to get life insurance coverage. It is safe to say that life insurance is important for senior citizens who wish to take care of themselves financially without being dependent on anyone.
By the time of their retirement, most people would have already taken care of their future requirements through various investments. However, in certain cases, they might still have some obligations to meet and dependents to provide for. To take care of these responsibilities, senior citizens may require a life insurance policy even at an older age. Some of the major reasons why they would require life insurance can be listed as follows:
In most cases, pension plans or annuity plans are suitable for the specific requirements of senior citizens in the country. However, other types of life insurance covers including term plans and whole-life plans are also suitable for them. Let’s take a look at the different types of life insurance products best suitable for senior citizens in India.
In addition to the plans listed here, senior citizens may also consider investing in other types of plans like money-back policies. Based on their risk appetite, senior citizens may also choose unit-linked insurance plans to maximise their investments. Most of the top insurance companies in the market have plans designed specifically for senior citizens. The country’s largest life insurance provider, LIC, also offers many plans designed for senior citizens in the country. Based on the benefits offered under these plans, you may pick the best plan suitable for your specific requirements.
Life insurance is essential for everyone irrespective of their age, income, or gender. Despite this, life insurance penetration in India is considerably lower among women compared to that of men. This situation is even worse among homemakers in various households. Women who subscribe to health insurance plans are mostly working women. However, life insurance is essential for homemakers as well. Some financial planners are of the opinion that people don’t need life insurance if they don’t earn. However, this is far from the truth. Women play a crucial role in the financial planning of a family irrespective of whether they earn or not. Hence, life insurance coverage is vital for all women.
For insurance companies, women occupy a large chunk of their target market. This is the main reason why insurers have developed policies exclusively for women. Women can avail any kind of life insurance plans including term plans, endowment policies, ULIPs, pension plans, child plans, etc. Before we take a look at some of the top plans available for women, let’s understand why life insurance is essential for women in India.
The following reasons paint a clear picture of why life insurance is essential for women in the country:
Some of the top women-specific life insurance covers offered by insurers in India can be listed as follows:
In addition to the ones listed here, women can also access life insurance through the array of plans offered by various insurers. The number of policies designed exclusively for women is limited in the market. However, women can subscribe to any of the regular policies available for both men and women.
Smoking is a terrible habit that results in various health hazards. Nevertheless, smokers deserve to have life insurance coverage just like any other individual. For an insurance company, smokers represent a considerable risk. Smokers are prone to various health risks, and the risk of premature death is extremely high among smokers. Life insurance companies don’t deny insurance for smokers unless they already have a life-threatening disease. However, insurers charge higher premiums for smokers compared to non-smokers.
For instance, let’s consider LIC’s e-term plan. A 30-year old non-smoker male seeking a cover of Rs.1 crore for a 25-year policy term can purchase this policy for around Rs.13,000 per annum. For the same policy, smokers have to shell out more than Rs.18,000 per annum. This is the major difference in life insurance policies for smokers and non-smokers. The premium here is substantially different, and this is the price that smokers have to pay against the risk that they carry.
There are people who think that they can hide their smoking habit from the insurer to minimise their insurance costs. The first thing to note here is that lying to your insurer can be constituted as insurance fraud. In such a situation, the insurer has the right to take legal action against the policyholder. Also, if the death of the policyholder occurs as a result of his/her smoking habit, the insurer has the right to deny the claim settlement (provided it was not originally declared by the policyholder). If a claim gets rejected, family members who are financially dependent on this will suffer. Hence, it is not a good idea to hide your smoking habit while applying for a life insurance cover.
Insurance companies define smokers as anyone who consumes tobacco or tobacco-related products. Even those who take only chewing tobacco are listed under the smoker’s category when they buy insurance. At the time of signing up, a questionnaire asking for the details of your smoking habit will be presented to you. Based on the answers you provide, the company will determine the premium amount for your insurance plan. It is worth noting that an insurer typically does not distinguish between frequent smokers and occasional smokers. Hence, even if you smoke once in a while, you may still have to pay higher premiums in order to prevent any future issues in claim settlement.
Some of the general guidelines on life insurance for smokers are listed as follows:
Medical examination condition for life insurance varies from one insurer to another. It is mostly based on the age of the applicant. When you are applying for a cover at a young age, most companies do not require any medical examination. However, if you are over 45 years of age, you may have to undergo the medical tests prescribed by the company.
If you are a smoker who wants to avail life insurance, you may have to research the market for the plans that are suitable for you. There are also many cases where people quit smoking in the middle of their policy term. If you quit smoking at any point of time, you can contact your insurer and ask the company to revise the premium rates. It is essential that you quit smoking for at least six months to one year in order to be considered for a premium revision.
Some people are of the opinion that life insurance is beneficial only for salaried professionals who earn a fixed income every month. However, this is far from the truth. Life insurance is a must for everyone irrespective of their age, income, or profession. Life insurance is extremely important for business owners who have a lot more at stake than their own families. Business owners typically have a responsibility towards their employees and partners in addition to their families. Hence, it is crucial for a business owner to have a comprehensive life insurance coverage that takes care of their own families as well as other liabilities.
The good news is that most of the top insurers in the market provide life insurance for self-employed professionals. The terms and conditions of coverage and the cost of insurance remains the same for both salaried as well as self-employed professionals. However, the procedure for signing up for a policy may differ as the income proofs are different for salaried people and self-employed people.
The needs of self-employed, business people are just the same as those of salaried people. They have dependents to provide for and liabilities to manage. Life insurance can help them achieve this. Let’s take a look at the key reasons why business owners should have life insurance coverage.
The procedure for purchasing a life insurance cover remains pretty much the same for both business owners as well as salaried professionals. However, the documentation process is likely to differ a lot. If you are not sure about the documents required, you may get help from the customer service department of the insurer. Self-employed professionals may have to submit the following documents to obtain coverage from life insurers:
These documents must be submitted along with the application form. The company will verify these documents before providing coverage to the individual.
Life insurance comes with many benefits for both salaried personnel as well as business professionals. Considering the responsibilities that business owners have towards their families as well as businesses, life insurance is an absolute must for them. With proper financial planning, business owners can get the most out of a life insurance cover and secure the lives of their dependents.
Despite its many rewards, entrepreneurship also brings with it a number of risks. Setting up your own business or expanding the business could translate into high initial costs, and many entrepreneurs usually take loans and debts to pay for such business needs. Many first-time entrepreneurs also pool in all the available money into their business without keeping a portion of their savings aside to ensure the financial well-being of their dependents in case something unfortunate were to happen to them.
Thus, it becomes all the more important for entrepreneurs to purchase a life insurance policy in order to ensure that an untimely eventuality does not cause additional stress and hassle to one’s dependents and business partners. A life insurance policy will ensure that your dependents have the necessary finances to pay off any loans that you might have taken and will also help them set aside sufficient finances that will enable them to pay for their own immediate and long-term financial expenses. Read on to know more about some of the types of life insurance products that an entrepreneur can purchase and why it is necessary for entrepreneurs to always have a life cover.
Purchasing a life insurance policy is a smart way to provide financial security to the people who count on you. However, before you purchase any life insurance policy, make sure to do your research, compare various policies, assess your coverage needs, and purchase a policy that provides the required coverage at a cost-effective premium rate. When purchasing a life insurance policy for yourself, you should also consider purchasing riders or add-ons to increase the coverage offered by the policy.
One of the general requirements for getting life insurance in India is that the applicant must be an Indian citizen. However, there might be situations in which an Indian citizen temporarily residing in a foreign country might need life insurance. Also, an existing life insurance policyholder may have to move to another country for work or education purposes. The good news is that life insurance companies provide coverage under both circumstances. As per the guidelines formulated by the IRDAI, a Non-Resident Indian (NRI) living in another country may also avail coverage from Indian life insurers.
Some of the general guidelines about issuing life insurance for NRIs are listed as follows:
NRIs can choose either Indian currency or foreign currency for the payment of premiums. Existing policyholders who have moved abroad may continue to pay the premiums in Indian currency through their family members in India. If there are no family members living in India, policyholders also have the option of using their NRO or NRE accounts for the payment of premiums in Indian rupees. On the other hand, NRIs can pay the premiums in foreign currency through their online accounts. If the premium is paid in Indian rupees, the proceeds generated from a policy shall not be repatriated. However, if the premium is paid in foreign currency, all the proceeds from the policy shall be repatriated by the company. This applies to both death and maturity benefits.
Both term plans and maturity plans offer global coverage for policyholders. In term plans, compensation will be issued to the family even if the policyholder dies in a foreign country. In case of maturity plans, the maturity amount will be paid to the policyholder even if he/she is living in another country. Since the life coverage is available even after moving to a foreign country, it is advisable to keep the policy active following relocation. On the other hand, if the policyholder is thinking of giving up Indian citizenship altogether, it is better to check with the company regarding the terms of the cover.
Since it may not be possible for NRIs to visit the branch office of the insurer, some companies like LIC operate a dedicated help center for NRIs. This department focuses exclusively on providing service to customers living in foreign countries. If you are an NRI having trouble with the payment of premiums or any other service issues, you may contact the NRI Centre and air your grievances. This help center will assist you if there are any issues in accessing your policy.
Insurers compute the premium for a life insurance plan by analysing the probability of a payout on death. The higher the probability of a payout, the higher the premium amount will be. It is for this reason that individuals with an unhealthy lifestyle are charged a higher premium compared to those who look after their health.
In addition to the factors which are used to determine the premium, insurance companies also charge money under the following categories:
Note that the charges mentioned above could vary based on the type of policy chosen by an individual. It is advisable to check these charges before purchasing the policy.
It is crucial that you pay the premiums towards your life insurance policy on a regular basis, as per your premium payment mode, to keep your policy from lapsing. However, if your policy has lapsed due to non-payment of premiums, most insurers will give you the option of reviving the policy. Thus, here are a few things you should keep in mind before reviving a lapsed insurance policy:
It is advisable to revive your lapsed policy at the earliest since reviving it will help you avail the policy benefits as per schedule, as opposed to purchasing a fresh insurance policy and waiting for a longer period of time to receive the due benefits. Further, since the policy was purchased at an earlier date, the premium payable is likely to be lesser than that of a new insurance policy.
In life insurance, the contestability period refers to the period during which the company may investigate your claims. In most cases, the contestability period of a life insurance policy is about two years. This means that the insurance company has the right to investigate your claims and deny it if necessary (upon deduction of any fraud) within this period. However, it is worth noting that the insurer cannot deny your claim without any valid reasons. If there are any misrepresentations or fraud, the insurer is most likely to find about it during this contestability period and reject the claim.
Life insurance exists based on the mutual trust between the insurer and the insured. If this trust is breached at any point, the coverage will not be deemed valid by the insurer. During the first two years of the policy, the insurer is likely to have strict investigative norms to prevent fraud against the company. Even if there is no claim, the insurer may verify the policy details and check if there are any misrepresentations. In case of fraud, the insurer will reject the coverage provided to the policyholder and initiate legal actions. Hence, it is always better to provide valid details while signing up for a policy.
An insurer may reject a policy or claim due to the following reasons:
These are some of the major reasons for which claims could be rejected by the company. In life insurance policies, misrepresentation refers to deliberate attempts at defrauding the insurer. Unintentional typos in the name and address of the policyholder cannot be considered as misrepresentation. However, it is always better to fix these errors in a policy document if you ever come across such instances.
If a policyholder dies during the contestability period, the company may investigate the validity of the claim based on the above-mentioned factors. If any fraud or misrepresentation is established during this investigation, the company has the right to reject the claim. Even the simple details people furnish at the time of applying for a policy are crucial when it comes to settlement of claims during the contestability period.
In case of death claims arising immediately after taking the policy, the insurer may get suspicious and investigate the reason for death. The contestability period is established mainly to discourage fraudulent buyers who take life insurance with the sole purpose of defrauding the company. Just because a company investigates a claim does not mean that it is going to get rejected. If all the necessary details are properly furnished, there is no reason for a policyholder to worry about the contestability period.
All major life insurance companies in the market have an exclusion regarding the suicide of the policyholder. In most cases, the insurer has no obligation to provide any compensation if the policyholder commits suicide within 12 months from the date of inception of the policy. While the suicide clause is an exclusion, contestability primarily deals with the inaccurate information provided by the policyholder. Also, the suicide clause is limited to non-payment of the claim amount to the beneficiary whereas contestability deals with insurance fraud and criminal liabilities.
Life insurance is all about protecting the family of the insured from financial troubles. There is nothing scarier than one’s claims getting rejected when the entire family is dependent on this compensation. If you wish to avoid claim rejection or policy cancellation during the contestability period, the best thing you can do is to make sure that there are no misrepresentations in your policy. Even if you come across an error after receiving the policy, you must contact the insurer immediately and update it with the correct details. If you have done everything right with regard to the information provided in your policy, you have nothing to worry about from the insurer investigating your policy during the contestability period.
An individual life insurance is something that you can take on your own after careful research of existing plans in the market. Here, you are at liberty to choose the sum assured amount, policy term, rider covers, etc. Alternatively, group life insurance is something that is typically offered by employers to their employees. While the coverage is offered for free, employees cannot choose the type of coverage they can obtain. Both types of policies come with their own set of pros and cons. Some of the key differences between individual life insurance coverage and group life insurance coverage are listed as follows:
|Individual life insurance||Group life insurance|
|Individuals can choose the coverage amount (sum assured) based on the premium they can afford.||Employees cannot choose the coverage amount on their own. Employers decide the coverage amount suitable for their employees.|
|The coverage can be enhanced with the help of riders or add-on policies.||Employees are not free to choose rider policies.|
|The insurance contract exists between the individual and the insurance company.||The insurance contract exists between the employer and the insurance company.|
|This policy remains active as long as the premiums are paid regularly. It can be cancelled only by the individual.||The insurance company has the right to cancel the group life insurance policy, if deemed necessary.|
|This can be ported to other insurance companies in the market.||This cannot be ported to other insurers.|
|For people over a certain age, the company may require medical examination before offering the coverage.||No medical examination is necessary for group life insurance irrespective of the age of the members.|
|The premium increases based on various factors such as age, location, smoking habits, health condition, etc.||The premium charges are set by insurance companies based on contract negotiations with the employers. Typically, it is based on the average age of all employees in the company.|
|Individuals can choose the policy term based on their own requirement and affordability.||The coverage terminates when the employee leaves the job due to resignation or other reasons.|
|The policy will be issued individually in the name of the insured.||One single policy will be issued to the employer. The policy document must contain the names of all employees associated with the company.|
|Most term plans allow unlimited coverage where the insured person can choose any sum assured he/she wants.||The sum assured is based on the employer’s affordability. In most cases, it will be 1 to 3 times the employee’s yearly salary.|
Group coverage has a lot of advantages for employees of an organisation. However, it is always much safer to have an individual life insurance cover even if you are enrolled in a group insurance plan. Since the individual life cover terminates once you are no longer in a job, it is not a good idea to rely on it when you are in your middle or old age. For instance, if you quit your job at 40 years of age and start a business, you may have to opt for an individual life insurance cover after that. The premium charges will be much higher when you enter a policy at 40 years of age compared to 25 years of age.
Employer-sponsored life insurance plans can be used as supplementary coverage in addition to your existing coverage. However, it is not a good idea to rely on them exclusively. If you wish to enter a term insurance plan, it is cost-effective to enter at a young age when the premiums are cheaper. Also, with individual life insurance, you can customise your policy based on your specific needs and get access to comprehensive life insurance coverage.
Yes, there are a few key differences between life insurance and general insurance. Before we highlight these, it is important to understand what general insurance exactly means. General insurance is typically defined as any contract which does not cover the life of the individual. It is a non-life policy which can be used to protect any material belonging of an individual. Health insurance also falls under general insurance.
The table below highlights the major differences between Life Insurance and General Insurance:
|Parameter||Life Insurance||General Insurance|
|Definition||A contract under which the life of the person is covered/protected||A contract which does not cover the life of the person. Eg: Fire insurance, car insurance, home insurance, etc.|
|Duration||Typically long-term (there is an option for short-term cover as well)||Short-term in almost all cases|
|Premium||Typically paid over the premium payment term –spread over the years||Typically paid as a single amount at the start of the policy|
|Purpose||Serves as an investment cum savings option||Serves as protection against loss/damage|
|Insurable interest criteria||The insured individual should be present (alive) while the contract is being drafted.||The person/object being insured needs to be present when the contract is being drafted as well as when the loss occurs.|
|Savings component||Present||No scope for savings|
|Insured amount||An individual can choose the amount he/she wishes to be insured for||The insured amount is determined based on the actual value of the loss/liability|
While both these products might have differences, it is a smart option to buy a good insurance plan. Staying covered can offset liabilities and help one get the most out of their belongings.
Following the emergence of e-commerce, various financial products are now being sold online by companies in India. Online sales enabled companies to serve a wider population without setting up sales offices in every location across the country. Instead, these companies can set up offices in select locations and major cities to provide customer service. Despite this advancement in e-commerce, there are many companies that still sell offline insurance plans that can be bought only by visiting a branch office.
India’s largest life insurance company, Life Insurance Corporation of India (LIC) still sells most of its plans offline. However, more and more private insurance firms have now started offering online plans to cater to the needs of their customers. Some of the top private companies in the market including ICICI Prudential, HDFC Life, Max Life, Bajaj Allianz, Reliance, etc., offer plenty of online plans for their customers. There are plenty of benefits when it comes to choosing online life insurance plans. These benefits can be listed as follows:
Online policies are gaining popularity in the recent days among young customers who find it a hassle to visit a branch office for buying insurance. Since most financial products are now bought online, the number of takers for online insurance plans is increasing in the market. If you are someone who prefers face to face conversation and expert guidance, you can opt for an offline plan by visiting the company directly or contacting an agent. Most agents have expertise in this field and can guide you in the right direction. However, if you wish to do research on your own and choose the best one suitable for your needs, online life insurance plans are the best option available to you.
A policyholder can choose a beneficiary who will receive the assured amount in case of his/her death. This individual is termed the primary beneficiary. However, there could be certain cases where the primary beneficiary passes away along with the insured individual. This is where the need for a contingent beneficiary arises.
A contingent beneficiary is an individual who will receive the sum assured if the primary beneficiary passes away. He/she is the second-in-line with respect to the amount. A policyholder can choose a contingent beneficiary at the time of purchasing the policy.
It is possible to choose more than 1 contingent beneficiary, dividing the amount proportionally between all said beneficiaries.
A contingent beneficiary needn’t be a person, for one can choose a trust/charity/organisation as the beneficiary.
Choosing the right insurance plan boils down to a few simple points. The first step involves determining your individual needs. Ask yourself how much cover you need, the duration you wish to be protected for, the returns on an investment, etc. Once these questions are answered you can choose the type of plan which suits your needs. If you are looking for income post retirement choose a pension plan, if you wish to protect yourself against all odds choose a whole life plan.
Once the kind of plan is selected it is important to compare the different options available in the market. Select an insurance company with a good track record. The IRDA provides information pertaining to how all insurers in the country have performed. Check the claim settlement ratio, the assets under management, the grievances solved ratio, the network a particular insurer offers, etc. Select an insurer who you think will be the right partner.
Choosing the best insurance plan takes time and research. In case of doubts it is always a good idea to consult experts who can guide you.
Insurance plans can be customised according to the need of an individual. As such, it is possible to choose a high cover under any plan option. The major difference lies with respect to the premium. While it is possible to opt for a high sum assured under other plans as well, the premium for such sum assured is much higher than the premium for the same sum assured under a term insurance plan.
The main reason for this is the fact that a term insurance plan does not offer additional features which other plans come equipped with. For example, most such policies do not provide a loan option. Similarly, these plans do not meet any financial needs while the insured is alive. Most plans do not even offer a maturity benefit if the policyholder survives until the end of the term.
Given these facts, insurers have to price term insurance plans lower in order to generate interest and increase sales.
Yes, it is absolutely safe to buy an insurance plan online. However, one should always double check the website from where the policy is being purchased. There are no risks involved when the plan is purchased from the official website of the insurer. There are a few websites which have been given permission by the IRDA to sell insurance plans. In case one is using such websites it is mandatory to check the IRDAI web aggregator licence before deciding to pay for it online.
Never buy a policy from websites which are not authorised to sell insurance plans.
The cover under a life insurance plan begins from the Effective Date. This is typically mentioned in the policy document. The effective date can vary from insurer to insurer, with the cover beginning after the premium has been paid in most instances. In certain cases the cover begins only after the policyholder accepts the policy .
Yes, life insurance plans not only provide financial assistance in case of any unfortunate event, they also help one save money on tax. Under Section 80C of the Income Tax Act, one can avail a tax deduction on the premium amount paid by them towards maintaining a life insurance plan. This benefit is also applicable if an individual pays the premium for his/her spouse or child. Both individuals and Hindu Undivided Families are eligible to enjoy tax benefits or tax rebates under this section.
The maximum permitted deduction under Section 80C is Rs.1.5 lakh. This amount is decided by the government and can change yearly.
Similarly Section 10 (10)D of the same act provides a provision for tax benefits on the amount received at death of the policyholder, or maturity/surrender of the policy. The amount received does not attract tax, subject to certain conditions. The Income Tax Department will levy a tax if the premium amount exceeds the limits specified by them.
It is a smart option to consult a tax consultant or a tax advisor to utilise all the tax benefits provided by a life insurance plan.
The tenure and sum assured should be chosen after looking at your current life stage and link this to future expectations. Individuals who might encounter expenses in the future should opt for a high sum assured, ensuring that inflation is accounted for. Similarly, those who have opted for pension plans should ensure that the amount chosen is sufficient to help them continue with their existing lifestyle.
There is no ‘one size fits all’ rule under life insurance. It is imperative to assess future requirements while choosing the sum assured. Similarly, the term should be long enough to cover any eventuality. There is no harm in choosing a longer term. On the other hand, if a short term is chosen, the benefits received might not match the expectations, especially in case of a term plan.
While selecting the term and sum assured it is suggested that you visualise the future and base the decision on this.
The premium is the amount each policyholder is expected to pay in order to enjoy the benefits provided by the policy. One can view it as the investment amount. The sum assured is determined on the basis of the premium, with it possible to increase this sum by increasing the premium amount.
The premium payment depends on the type of policy one purchases. While certain policies like annuity plans require the premium to be paid as a single amount up front, other plans offer flexibility in terms of premium payment.
One can choose to pay the premium either annually, semi-annually, quarterly, or monthly, if the plan provides this option. Certain plans permit only annual payment of premium whereas others provide different alternatives, offering more flexibility to the policyholder.
In cases where one chooses to pay the premium at regular intervals, the entire premium amount is split into the number of terms for which it is expected to be paid. One should check all the premium payment options before deciding to purchase the policy.
Certain life insurance plans mention the term ‘bonus’ in their brochures. A bonus is nothing but an additional amount which the insurer pays over and above the sum assured. This is similar to bonuses in other products.
The bonus is the profit made by the insurer, with this profit shared among policyholders. The bonus amount is determined by the insurance company and might vary from year to year. Insurance companies are not obligated to offer a bonus, with this decision depending on the Board of Directors.
Not all life insurance plans are eligible for a bonus. One can check whether their policy qualifies to partake in the profit by going through the product brochure. Policies which fall under the ‘with-profit/participating’ category are entitled to receive a bonus if the company makes a profit. On the other hand, policies which fall under ‘non-participatory/without-profit’ are not eligible for bonuses.
One should check whether their policy qualifies for a bonus before they buy the policy.
There are three major categories of bonuses offered by insurance companies, with these being Terminal Bonuses, Interim Bonuses, and Reversionary Bonuses. Reversionary bonuses are further classified into simple reversionary bonuses and compound reversionary bonuses.
A terminal bonus is provided only when the policy terminates, i.e., either on maturity of the policy or on the death of the insured. This is a one-time bonus.
A reversionary bonus is a bonus component which is added at regular intervals. This can be yearly or after completion of a few years.
An interim bonus is provided if the policy terminates before the completion of a financial year. Other bonuses are declared keeping the financial year into account, but this one provides a solution in cases where the financial year is not completed.
The primary difference between a participating and nonparticipating policy is that a participating policy partakes in the profits of the insurer whereas a non-participating policy does not partake in any of the profits. In simple words, a participating policy can qualify for bonuses whereas a non-participating policy will not earn any additional bonus.
The sum assured is used to determine the bonus a policy is eligible for. Most insurers offer a bonus per Rs.1,000 sum assured (or any other fixed value). The bonus is a fixed amount per the selected unit.
For example, if the company decides to give a bonus of Rs.30 per Rs.1,000 sum assured, the total bonus for a sum assured equivalent to Rs.10 lakh becomes Rs.30,000. If the period is 10 years, the overall bonus amount becomes Rs.3 lakh, subject to the same bonus being offered each year.
A basic life insurance plan might not be sufficient to meet all the requirements of an individual. Instead of purchasing a new policy, one can buy a rider instead. A rider is nothing but an add-on which offers certain additional features and benefits, thereby enhancing the policy.
You can buy a rider by contacting the insurance provider and paying the amount for the rider. There is also an option to buy a rider at the time of purchasing the policy.
There are numerous instances of individuals purchasing a policy and then realising that it doesn’t meet their requirements. Returning such policies is an option provided by IRDAI. This return is possible only within a specified period of time, termed the free-look period. A policyholder can return the policy to the insurer within this timeframe, subject to certain terms and conditions. The insurer will refund the premium after deducting their administration charges.
If you choose to cancel your policy within the free-look period the insurance company will refund the premium amount paid by you. They will deduct all expenses borne by them to complete the formalities associated with issuing the policy and then cancelling it.
If one fails to pay the premium amount within the grace period the policy either lapses or turns into a paid-up policy. The benefits and protection accorded by the policy automatically change in such circumstances.
The policy will continue to be active during the grace period. It is therefore important to pay all dues before the grace period ends.
There could be instances where a policyholder does not wish to continue with the policy. He/she can choose to surrender it under favourable circumstances. If the policy has been active for a specified period of time it is eligible to receive the surrender value.
This is nothing but the amount paid by the insurer to the policyholder if he/she terminates (surrenders) the policy before its maturity date.
Companies compute the surrender value after taking the original term of the policy, the premium amount, and the period for which the premium was paid into account. Typically, premiums for a minimum of three years should be paid in order for a policy to be eligible for a surrender value.
There are two types of surrender values, the guaranteed surrender value and the special surrender value.
The guaranteed surrender value (GSV) is a certain percentage of the premium amount paid during the term of the policy. The premium for the first year is excluded while computing this sum. A certain percentage of the premium amount is paid to the policyholder as the guaranteed surrender value. For example, an insurer provides GSV of 30% of the premium. An individual who pays Rs.50,000 per year for a period of three years would be entitled to a GSV of:
(1,50,000 – 50,000) x 30/100
The special surrender value (SSV) is computed by taking the surrender value factor into account. This factor is a certain percentage of the paid-up value acquired by the policy. This factor increases with each active policy year.
In essence, the longer the policy was active the higher the surrender value will be.
Assignment refers to the process of transferring the ownership of a life insurance plan to someone else. All rights associated with the policy would move on to the new owner. The assignor is the individual who chooses to transfer all rights, with the assignee being the individual to whom such rights are transferred.
For example, an individual who avails a loan against a policy could be expected to assign the policy to the bank/lender. If the assignor were to pass away during the policy term the sum assured would be paid to the bank/lender.
Purchasing a life insurance plan isn’t like other regular purchases we make. It can be extremely useful in the future, having the power to financially support our loved ones. As such, it is imperative to thoroughly assess one’s needs, research for the right product, determine the cover amount, calculate the effect of the regular premium payment on our budget and then take a step.
Also, one must ensure that they don’t over-insure themselves, for an exorbitant cover essentially boils down to a high premium, which could strain the finances of the person. It is better to choose a sum assured which is affordable rather than choosing a high sum assured and miss payments, for this could result in the policy getting lapsed, thereby making the policy pretty much useless.
A medical report is required only in certain instances. In this case you will be expected to undergo tests specified by the insurer. A full medical test might include a physical exam which checks the height, weight, pulse, and blood pressure of the applicant. In addition to this other tests might be conducted to check the cholesterol, sugar levels, blood count, etc. A urine sample might also be taken.
Insurers do these tests to check the functioning of vital organs, which can help them analyse the individual’s health.
In certain cases one might also be asked to undergo a HIV Test to rule out the possibility of HIV. Additionally, one will have to provide all past medical reports, history of family illnesses, etc.
Yes, it is possible to avail a loan through a life insurance plan. However, not all policy types come with the feature of a loan. For instance, a loan cannot be availed against a term insurance plan.
The policy brochure typically indicates whether the policy comes with a provision for loan.
The IRDAI has made it mandatory for all insurance agents to be registered. Check whether the agent has a licence issued by IRDAI. The licence should state that the said individual is eligible to sell a life insurance plan. There are different licences granted for different insurance products, with a separate licence given to general insurance agents. In certain cases a composite licence is given to an agent, enabling him/her to sell both life insurance and general insurance.
Using references from friends/family members who have purchased a life insurance plan through agents can help alleviate any fear of a fake agent. Always question the agent and check his/her knowledge about the product before committing to a policy.
Not all agents are authorised to collect premiums on behalf of the insurer. Before paying the sum to the agent, first verify his/her credentials. He/she must be authorised by the insurer to collect premiums. Ask for such authorisation. If all checks out you can pay the premium but make sure to collect a signed receipt for the same.
Gone are the days when one depended on an insurance agent to buy the policy. Today, it is possible to buy a policy online, avoiding all middlemen. Choosing to buy a life insurance plan online is quicker and transparent, giving one the flexibility to complete the task at one’s own speed.
Additionally, online purchases are safe even if the policy is purchased through an intermediary. There are no risks of the insurance agent absconding in case of online purchases.
People used to rely on insurance agents to give them an overview of the product, but it is now possible to connect and chat with online representatives who can provide the same information.
Additionally, one can also get a better rate on the premium if the policy is purchased online.
Given these features it is a better option to buy a life insurance plan online.
Insurance companies use an algorithm which predicts the chance of a payout for each policy they sell. The higher this percentage, the higher the premiums are going to be. The risk is computed by taking factors like the applicant’s age, medical history, current lifestyle, work environment, etc. into consideration. They might also take factors like the average lifespan in a particular region, health issues faced by residents of a particular city, chances of infections leading to death, etc. into account.
This depends on the type of policy chosen. Certain policies require only a single premium to be paid at the start. Others give an option to pay the premium at regular intervals. The premium amount should be paid for the complete duration of the premium payment term. This term might or might not be equal to the policy term. Most insurers provide an option to pay the premium at regular frequencies, which can be chosen by the policyholder. The available options include paying either yearly, every six months, every three months, or every month.
Yes, it is possible to make a few changes to your insurance plans. These rights are laid down by the IRDAI. The changes which are permitted include:
Changing the premium payment mode
Changing the policy term
Changing the sum assured (only an increase in this amount is possible)
Switching between funds
Redirecting the premium
Any other change requests can be denied by the insurer. It is important to read the terms and conditions of the policy to comprehend the changes which are permissible under it.
Premium redirection is a concept which is primarily used in ULIPs. This is the process of redirecting/realigning the premium wherein one can tell the insurer to invest future premiums in specific funds. The current funds are not modified in this case.
This can be understood through the example of Mr. Jay who has invested in a ULIP wherein his premium is split between equity and debt funds in a 50:50 ratio. Now, Mr. Jay senses a new investment opportunity wherein he feels that cash funds will offer better returns. As such he asks his insurer to redirect the future premium into cash funds. This ensures that all future premiums are invested into cash funds, with no changes made to the existing investments.
There could be instances where an individual wishes for a higher cover but is not in a position to afford the premiums. A graded life insurance plan can come handy during such situations. A graded policy is one where the premium amount increases at regular intervals, stopping at pre-set limit. This enables an individual to avail the benefit of a high cover without having to exhaust all resources initially.
It is a smart option for those who foresee an increase in their income, enabling them to afford a higher premium after a few years.
The cover provided by a life insurance plan can vary from case to case. Most of them cover death due to natural causes as well as accidents. Individuals can choose to add riders to a base policy in case it doesn’t cover death due to certain reasons.
Proposal forms are extremely important in life insurance plans, with insurance companies using them to gauge the eligibility of an individual. The proposal form is similar to KYC documents which banks and other establishments require. The applicant is expected to fill this form truthfully, providing all the information needed.
Typical information requirements relate to the name of the individual, his/her income, lifestyle habits (smoking, drinking, etc.), history of personal illnesses, history of family illnesses, current medical condition, fitness levels, age, height, weight, etc.
The information submitted here is used by underwriters to determine the premium amount. Any false information submitted in the proposal form could be grounds for rejecting a claim in the future. It is therefore critical to be honest and open while filling it.
Insurers also use the information provided to gauge the premium payment capacity of the applicant. The final decision on whether the applicant qualifies for an insurance plan is determined on the basis of what is mentioned in the proposal.
A maturity claim is easy to file. Most insurers inform the insured/policyholder before the maturity date of the policy. This intimation is typically provided a few weeks before the actual maturity date, with companies also informing them about the maturity amount they are entitled to. In addition to this, the insurer will also send a discharge voucher to the policyholder.
This discharge voucher needs to be signed and submitted to the insurer. Additionally, the original policy bond should also be sent over. On verification of the policy and the signature the insurance company will settle the amount on the date of maturity.
A few insurers also ask policyholders to choose how they wish to receive the maturity amount. One is expected to furnish this information so that the amount is transferred accordingly.
Insurance companies provide options when it comes to payment of the sum assured. These options can vary from policy to policy and insurer to insurer but can be typically categorised into five types:
Lump sum payment – Under this option the entire amount is paid as a single lump sum. No further amount will be paid after this. Nominees/beneficiaries who have immediate financial responsibilities after the demise of the policyholder can choose this settlement option.
Fixed period – Under this amount the sum assured plus any interest accrued is paid at fixed intervals for a specified period of time. The entire amount is paid during this period.
Fixed amount – This option involves the payment of a fixed sum of money at periodic intervals. The sum is paid until the entire amount is paid to the beneficiary.
Lifetime income – Under this option a beneficiary can choose to receive a certain portion of the accumulated amount for the entire duration of his/her life. Insurance companies typically purchase a pension/annuity plan with the death benefit, with this policy in turn paying the amount.
Interest only – Under this option a beneficiary can choose to receive only the interest at intervals chosen by him/her. The principal amount can be withdrawn as per his/her needs.
Insurance companies are expected to file taxes based on their income and expenditure. As such they are also required to be transparent when it comes to their taxes. Most insurers send out a tax policy statement to policyholders after the completion of a financial year. This report contains everything associated with the taxes paid by them. This statement can be used by an individual to compute his/her own tax (in certain cases).
This is primary because the older one is the higher the chances of his/her death. This increases the chance of a payout from the insurer. While it might not be the case in all occasions, it is riskier to insure an older individual compared to a younger one. With insurance companies looking at the probability of a payout in each case, they are prone to charge a higher premium with an increase in this probability.
In case the policyholder passes away during the policy term, the nominee can submit a death claim by submitting the following documents:
Duly filled claim form which is signed by the nominee. The date, cause, and place of death need to be mentioned in this form
Death certificate of the insured
Original policy document
Legal proof showing that he/she is the legal heir (in cases where the nominee hasn’t been mentioned)
Any assignment/re-assignment documents associated with the policy
Certificate from the hospital
Certificate from the employer (in certain cases)
Copy of police report (if applicable)
An insurance company can ask for additional documents if required.
Yes, it is possible to find life insurance plans which pay money during the policy term. The money is paid as survival benefit, with the payment beginning after the premium payment term. A certain percentage of the maturity sum assured is paid at regular intervals until the policy matures.
A number of Money Back policies come with this option. Individuals looking for such benefits should discuss the same with the insurance provider/agent in order to find a policy which pays them money during the policy term.
Yes, it is a better option to buy a life insurance plan at a young age. Premiums are cheaper when the policyholder is young. Insurance companies increase the premium amount with the age of the applicant. Additionally, they can also offer rebates on the premium amount in certain cases.
A young policyholder can enjoy a high cover at affordable rates. Opting for a high cover when one gets older results in premiums which are considerably higher.
Most companies provide insurance to their employees. The insurance is purchased in the form of group plans. Employees who wish to avail an individual policy could get in touch with the group insurance provider and buy a new one.
Most group insurance plans provide limited cover and should not be the only source of insurance for an individual.
Yes, it is possible to buy a life insurance plan for your parents. Choosing to insure your parents can be a good option, ensuring that they needn’t rely on anyone if one of them passes away. Insurance companies provide options wherein an individual can cover two people in a single policy, making these ideal to insure one’s parents.
Yes, it is possible for senior citizens to buy life insurance plans in India. A number of insurance companies offer products designed for senior citizens. While it might be hard to buy a term plan, one can choose to invest in an annuity/whole-life policy.
One major disadvantage of purchasing a policy at an old age is that the premiums are typically higher.
The amount received as payout under a life insurance plan is exempt from tax under Section 10(10D) of the Income Tax Act of 1961. While the death benefit is completely tax-free, there are certain exceptions when it comes to maturity benefit.
In case of policies issued from 01/04/2003 onwards the benefit is exempted only if the premium for such policies is less than 20% of the sum assured. This limit is reduced to 10% for policies issued from 01/14/2012 onwards.
The sum assured which is exempt from tax does not include the premiums which have been returned to the individual. This also does not include any bonus which exceeds the actual sum assured.
It is advisable to consult a tax consultant or tax advisor to utilise all the provisions provided by the government.
The cash value is nothing but the money paid by the insurer if the policyholder cancels the policy. It is typically associated with whole life insurance plans. It normally takes anywhere between 12 to 20 years for the cash value to build up, depending on the premium amount paid and the policy type chosen.
The individual who makes a payment claim to the insurance company is called the claimant. With regards to a maturity claim the claimant is typically the insured/policyholder. In case of a death benefit claim the claimant can be the nominee/legal heir.
A modified death benefit is associated with Modified Benefit Life Insurance plans. These policies are not common in India, with them being more prevalent in western countries. Under the concept of modified death benefit, the sum assured is not payable in all cases. If the policyholder dies within two years of purchasing the policy the insurer will pay only the premiums plus an additional amount.
The complete death benefit will be paid only if the policyholder dies after a specified minimum period. This is typically three years after the policy is purchased.
Yes, insurers will pay the death benefit if the insured dies in an accident which was a result of him/her driving under the influence of alcohol. However, it is possible for insurance companies to contest such claims if the policyholder had not mentioned the fact that he/she used to drink while purchasing the policy.
Most life insurance plans have only one exclusion – suicide. If the policy mentions accidents caused due to drunk driving as an exclusion no benefit will be paid.
Yes, if the insured has specified a beneficiary in his/her policy. Probate is a possibility if no beneficiary was chosen/if the beneficiary passes away before the policyholder’s demise (with no other beneficiary selected by the policyholder).
A premium quote is an estimate of how much you will have to pay as premium for a life insurance plan. Before you purchase a life insurance plan, it is necessary to request for premium quotes from various insurers, either on the insurer’s official website or through third-party websites. This will help you compare between the premium rates offered by various insurers, and can thus help you choose a plan with competitive rates.
Yes, you can purchase a Child Insurance Plan for you children. A child insurance plan can help you financially plan for significant milestones in your child’s future, thereby enabling you to secure his/her future. A child insurance plan is a smart way to build your savings and accumulate wealth for any needs that your child may have in the future.
Investing in a pension/retirement/annuity plan is a smart way to secure your post-retirement years as you will be guaranteed a fixed source of income. A ULIP or a Unit Linked Insurance Plan, on the other hand, offers policyholders the combined benefits of a protection cum investment option. However, with a ULIP, the policyholder will have to bear the risk. It is important to note that some insurers also provide retirement/annuity/pensions plans that are unit linked.
Before you purchase any insurance plan, ensure that you consider your financial goals, needs of your dependents, liabilities/debts, your appetite for risk, etc., and make a decision accordingly.
Insurance premiums usually vary from insurer to insurer. Insurers consider factors like the sum assured, age at entry, policy tenure, risk undertaken, etc. when deciding a premium. Life insurance premiums are not directly fixed by the Insurance Regulatory and Development Authority of India (IRDAI).
Certain insurers may offer you a discount if you purchase an insurance policy online. However, insurers are not bound to provide this discount, and the percentage of discount may also vary from insurer to insurer. Having said that, purchasing an insurance plan online is both hassle-free and time-efficient.
Your premium amount is based on the amount of risk that the insurer undertakes by selling you the policy. Thus, insurance providers calculate the payable premium on the basis of factors, such as your age at the time of purchasing the policy, the sum assured, riders opted for, policy tenure, premium payment term, etc. Make sure to request for a premium quote and compare premiums offered by various insurers before purchasing any insurance plan.
Most life insurance policies come with a suicide clause. Thus, if the insured individual commits suicide within a certain period of purchasing the policy, no death benefit will be paid to the nominee. Instead, the insurer may return a portion of the premiums paid during the policy tenure to the nominee. For a detailed list of exclusions, make sure to read your policy brochure.
Most insurers give policyholders the option of increasing the sum assured amount at the time of renewing their policy. However, this feature might vary based on your insurer’s terms and conditions. Thus, make sure to contact your insurance advisor or read through your policy brochure for more information.
For most life insurance policies, the grace period is fixed between 15 – 30 days. Thus, if you don’t pay your premiums within the end of the grace period, the policy might lapse. There is no option to extend the pre-defined grace period.
Yes, a term insurance plan will cover death that occurs abroad. However, make sure to inform the insurer before you leave the country. In case you are travelling to a country that has been labelled as high-risk, the benefit payout may get affected.
The claim settlement ratio is defined as the overall number of death claims that have been approved by an insurer against the total number of death claims it received. Insurance companies usually report this on an annual basis to the IRDAI (Insurance Regulatory and Development Authority of India) and the same is published on their website and annual report.
Yes, NRIs can purchase insurance policies offered by Indian insurance companies. Purchase of these policies can be done through online modes. However, make sure to compare the features and benefits offered by various plans on a trusted third-party website before you purchase your policy.
If you have your lost your original policy document, make sure to inform your life insurance provider about it at the earliest. The insurer might issue a duplicate policy to you. In some cases, a fee or penalty might also be charged for issuing you a duplicate policy.
In case the nominee has passed away and no change has been made to the nomination, the death benefit will be paid to one’s legal heir.
If you cancel your policy during the free-look period, you will receive most of the premium that you paid, minus a nominal amount. However, if you surrender your policy at any other time during the policy tenure, the insurer will pay you the surrender value of the policy, provided the policy has acquired a cash value.
In insurance terms, the Grievance solved Ratio is an important indicator of the company’s post-sales service. This ratio is basically the number of grievances which an insurer has resolved, as against the total number of grievances that have been registered with the insurer in one year, or a specified period. Therefore, if an insurer has received a total of 100 grievances in a year, and has managed to successfully resolve 75 of those, then the Grievance Solved Ratio will be 75:100. Therefore it is safe to say that this ratio is a very crucial indicator of not just the quality of service provided by the insurer, but also its efficiency in terms of grievance redressal, which is an important part of any transaction.
No, term insurance plans do not have an investment component because they are meant to offer pure risk protection. This is one of the reasons why the premiums for a term insurance plan will always be much cheaper as compared to other types of life insurance plan such as a ULIP which does offer an investment avenue. Because there is no investment component, no part of the premium amount has to be re-directed towards managing your investment. The entire premium is directed only towards providing life cover.
Life insurance policies usually provide cover for a specified term. If you wish to extend the term of your life insurance cover, a term insurance rider can be a helpful option. This rider is basically a top-up which adds to the term of your policy. For instance, if you have a life insurance policy for a term of 20 years, but wish to extend the coverage to 25 years, you can do so by getting a term rider with a term of 5 years. Therefore, if the insured policyholder passes away during the extended term of the plan, the death benefit will be paid.
Besides the usual critical illness rider, accidental death or permanent disability benefit rider, and waiver of premium rider, there are a number of other riders which many policy takers are not aware of. These include the term insurance rider, the Guaranteed Insurability Rider (where initial cover amount can be enhanced without undergoing a medical examination), Spouse Insurance Rider (to cover the spouse of the insured), Major Surgical Assistance Benefit Rider (for financial assistance for a major medical procedure), and the Family Income Benefit Rider.
As a policyholder, or a prospective policy buyer, you can easily calculate the cost of premiums that will be charged under your policy by using a simple online tool called an online premium calculator. This tool can be found on many third party websites, and also some insurer websites. To calculate premiums using this tool, you will typically be asked to provide details like the term of your policy, your age, sum assured you wish to take, premium payment mode, add-on riders 9if any), etc. After these values have been input in the calculator, it will instantly display the result, which will be based on the values which you would have provided.
While a life insurance provider does take into account factors like the applicant’s age, income level, current health state, medial history, etc. to calculate premiums, there are also some other components which are a part of the premiums charged. The premiums include the cost of various other expenses like the rider premium cost, administration fees, premium allocation fee, fund management charge, fund switching fee (for investment-linked plans), and mortality charges.
There are many ways using which you can make significant save on your life insurance premiums. These include (i) Choosing a high sum assured amount for which most insurers will offer you a modest rebate; (ii) making online premium payments or even purchasing the policy online can help you save significantly on the premiums as the middleman cost is eliminated, as is the paperwork, (iii) If you choose to make premiums payments annually, instead of monthly, you can get a higher rebate as the costs associated with processing premium are reduced. The lower the frequency of making payments, the higher rebate you can get, and (iv) remember to pay your policy premiums on time, to avoid the policy from lapsing, following which you will have to pay reinstatement charges.
The solvency ratio is defined as the size of the insurance firm’s capital relative to the risk that the insurer has undertaken. In other words, since the solvency ratio is a measure of the insurer’s assets against how much the company owes to various parties, it measures exactly how financially sound the company is and how capable they are to payout claims. Thus, to ensure that your insurer is able to settle your claim, regardless of what may happen in the future, it is necessary that you consider the solvency ratio of a company before purchasing a life insurance plan from them.
Before you purchase an insurance plan, make sure to consider the points mentioned below in order to get a better understanding of how much life cover you need to purchase:
Term insurance policies offer a high sum assured to policy buyers at a comparatively low premium rate. Thus, it is advisable to purchase a term insurance plan if you have a lot of liabilities and debts. However, the premium rate that is offered to you is linked to your age. Thus, at the age of 50, you can expect to pay a high premium rate for a term insurance plan. Before you purchase any insurance plan, you will need to check the various insurance plans that are available in the market, compare the features and benefits of each plan, request for premium quotes, and opt for a policy that offers you a suitable coverage at a competitive premium.
Insurers usually offer online premium payment options to facilitate or ease the premium payment process for policyholders. For this reason, most insurance providers do not offer a discount to policyholders if they pay their renewal premiums online. However, certain life insurance providers do provide a discount if you purchase the policy and pay the first premium online since it will result in reduced paperwork and eliminate the need for an insurance agent. Make sure to check with your insurance advisor or read through your brochure to know exactly what discounts are offered by your insurer.
Before the introduction of unit-linked insurance plans (ULIPs), insurance providers only offered traditional life insurance plans to policy buyers. Traditional insurance plans include term life plans, whole life plans, and endowment plans. These policies are risk-free, and are, thus, apt for risk-averse policy buyers. Traditional insurance plans provide guaranteed returns in the event of the policyholder’s death or at the completion of the policy tenure.
The premium payment term refers to a particular period during which time the policyholder must pay the due premium. Thus, the actual PPT may be equal to the policy term or lesser than the policy tenure, in the case of limited premium payment plan. To know the premium payment term of your insurance plan, make sure to read through the policy brochure.
If the nominee is a minor at the time of the policyholder’s death, the appointee can make the claim. In case no appointee has been assigned, the death benefit will be paid to the policyholder’s legal heirs.
Most insurance providers have a Claims Review Committee or a Grievance Committee. Thus, if you unhappy with the claims decision, you can inform the insurer’s Claims Committee in writing. Post this, the Committee will review your claim again.
Yes, unless this is listed as an exclusion in the product brochure. In several cases, insurance providers will charge you a higher premium if you have a pre-existing disease at the time of purchasing the policy. Certain insurance providers might exclude the disease or the condition from the policy coverage, even if they do provide you a policy. Thus, make sure to compare various plans available in the market and opt for an insurance policy that provides you coverage despite your pre-existing disease/illness.
I am a 30-year old unmarried man. I am working as a marketing professional in a private company. I earn Rs.70,000 per month. I am currently supporting my parents with my income. I don’t have any siblings. Apart from the insurance offered by my company, I don’t have any health or life insurance policies. My company offers both and my parents are included in health coverage. Is it necessary for someone like me to get insurance? Since I don’t have any other dependents, is it necessary to opt for high-value coverage?
Health insurance and life insurance is an absolute must for everyone. Since your company offers both, you may explore some options with regard to this. However, employer-provided insurance is very limited and it may not be adequate for you. With that being said, you may get a high-value coverage for health insurance by including your parents. If you get a health insurance plan with a deductible (by choosing your employer-provided sum insured as the deductible), it could be extremely cheaper. You can explore this for health insurance.
Coming to life insurance, it is much better to have a cover on your own. Term insurance is a must for everyone. Even though you don’t have any dependents now, you might have in the future. At that time, it could be must costlier to enter the policy. This amount may also be helpful in clearing your liabilities and securing the lives of your parents if something happens to you. So, this is the best time for you to enter the term cover. You need to choose the sum assured amount as at least 10 times your yearly salary.
Apart from term insurance, you may opt for other policies like endowment plans and retirement plans as per your future requirements. Before entering a policy, make sure that you do necessary research about the benefits you can get. Term insurance is a pure insurance cover and it is the cheapest option. It is cheap when you enter young. Hence, check out for term plans first even if you are not considering other insurance covers.
Are there any provisions in life insurance to keep the maturity amount invested and continue to earn interests? My life cover is maturity next month. I don’t have any need to withdraw the amount right now. Can I keep continue to keep this money in the policy without withdrawing? Will the insurer pay earnings on this investment?
There are some policies where you can continue your investment even after the policy tenure and continue to accumulate earnings. This is typically provided with unit-linked investment plans. Your investments will continue to remain active and you can withdraw it whenever you want. This option is known as ‘settlement option’, and it is offered only under select plans. You need to check your policy document to know whether there is such an option under your cover.
If you are not able to find it out on your own, you may check with your insurer by calling the customer service department. Provide your plan details and check whether you can continue the policy even after the maturity date. If this option is not available in your policy, you may get the maturity proceeds and invest the amount in a different plan. There are plenty of options available when it comes to investing your maturity proceeds. This time you can choose an investment plan that offers the flexibility to withdraw the amount whenever you want.
I am a single parent and I have a car loan that I am paying regularly through EMIs. My daughter is a minor and there are sufficient investments and support structures already in place for her. But is it possible to designate the proceeds of my life insurance towards repayment of the car loan, in case something happens to me, as I don’t want my daughter to bear the burden of repaying the loan?
Yes, it is possible for you to designate your life insurance proceedings towards your loan. You will have to get in touch with your financier and assign the policy to him/her. In case something happens to you, the cover amount will be used directly to clear the outstanding loan amount during that period of time. You will also have to fill an assignment form with the insurance company in order to get the proceedings of your cover amount towards your loan.
Only the assignee can revoke the assignment. Once, all the loans are cleared, the financier will re-assign the policy to you i.e. the policyholder.
My house in Chennai is insured against natural calamities and I have paid all premiums. I want to add two rooms and a kitchen to the second floor. Will my existing policy suffice? If I need to take a new policy, will I get any benefits for having had this policy for so long?
Your existing policy will cover the additional rooms added by you. However, it is also important that you increase the cover amount but only after the construction has been completed. Standard home insurance covers are applicable only for completed house structures. In case you want to cover a building still under construction, you must purchase a separate policy called Construction All Risk.
Since there is no waiting period for home loan covers, you will not receive any benefits if you decide to transfer from an old policy to a new policy.
I want to buy a life insurance but can I avail of a loan for it? I got an SMS stating loan facility as an exclusive benefit for a life insurance from a leading insurance company.
No, there is no provision for getting a loan if you want to purchase a life insurance policy for yourself. Even, insurance companies are also not known to offer a loan if you wish to purchase an insurance policy. In fact, a loan is available against surrender value of the life insurance policies. However, this facility is restricted to only certain selected insurance policies. You cannot avail this offer if you have purchased a term insurance plan or an endowment plan for yourself.
Is medical test mandatory while buying life insurance policy? Will my premium increase after I undergo the medical test?
In major cases, it may not be necessary for you to undergo a medical examination. However, if the option is available, it is highly recommended that you do undergo the medical examination for a very simple reason that you or the nominee does not face any problem during the settling of claims. Insurance companies employee their own doctors who conduct a thorough check on you to ensure that you are healthy or not based on which your premium amount is decided. Once you undergo the test, the insurance company has the proof of your health and on no grounds can they deny you the claims. Hence, keeping in mind that your loved ones do not face any claim related problems, make sure to undergo the medical examination. Your premiums will certainly rise if you are found to be suffering from any health-related issue. However, the premium amount can fall if you manage to overcome the health condition. You will have to inform the insurance company about it. Once they conduct a medical examination on you and are satisfied that you do not suffer from any medical condition, the will reduce the premium amount. However, you need to be transparent and honest with the insurance company so as to ensure that there are not claim-related problems in the future.
I purchased a life insurance policy before marriage and it has my maiden name. Now that I am married how can I change the name in the policy document? And how can I change the bank account that I had given for this policy?
Yes, you can easily get your name changed on your policy document. You will have to contact the insurance company which has issued you the policy and inform them regarding the change in your name. The insurance company will then help you with the process of how you can get your name changed on the policy document.
I am a 30-year old businessman who has plenty of savings and other investments. I have invested in mutual funds, real estate, and government bonds. I have also taken a loan for my home to save tax. My son is 2-years old right now. Is it necessary for me to invest in a life insurance cover? I don’t have any kind of life insurance so far. Please clarify whether my savings and investments are adequate for my family.
The primary use of a life insurance cover is to provide protection against uncertainty. Since you are a businessman, you must know about the uncertainty associated with businesses. You may come across a scenario where your business needs extra money. Also, life insurance is mainly for the needs of your dependents. It is always better to have at least a term insurance policy to secure the financial needs of your family. Since you are only 30 years old, you can still buy a high-value cover at an affordable price. Compared to your other investments, this could be meager. However, the high-value protection offered here cannot be compared to any other investments in the market.
In addition to term insurance covers, you may also explore the options offered by other covers like endowment policies, ULIPs, money-back plans, retirement plans, etc. These plans can be helpful during a time of need. For instance, a money-back plan offers a periodic return of the invested money. This could come in handy during the time of your need. Also, you can use life insurance to plan for specific milestones like building a home, children’s education, children’s marriage, etc. Considering all these factors, life insurance could be extremely beneficial even if you are in a good financial position.
If you have not declared to the insurance company that you hold more than one life insurance policy, then it is important that you do so. One of the reasons that why insurance companies are interested in knowing whether you hold more than one life insurance policy is because they need to check that your coverage is in proportion with your annual income and you are capable enough to pay the premiums. It is even more important that you declare to the insurance company about you holding more than one policy if you have a term insurance policy. You will have to declare to the insurance company that you hold more than one life insurance policy in writing to the insurance company’s issuing branch office. It is also important that you have the acknowledgement receipt of the declaration that you made.
My father died two years back. While doing renovation at my home, I came across a life insurance policy document in his name. There are not many details about the policy value and sum assured. Can I approach the insurance company with this document and seek more information? I am his only son. Can I get the money without any problem even if I was not nominated in the policy?
You can certainly approach the insurance company and seek more details about your policy. If you have the policy number, it will be a quick process to get all the required information. You may even check the details by calling the company’s customer service department.
Once you have information about the policy details, you can file a claim request with the insurer with the necessary documentation. You need to provide various details like death certificate, medical certificate, legal heir certificate, etc. It is highly likely that your father must have nominated your name or your mother’s name as the beneficiary. Even if there is no nominee information, the legal heir is entitled to receive the settlement amount. If you have all the necessary documents, you will not face any issues in getting the settlement amount.
How much insurance should I buy? I am 28 years old and earning Rs 8 lakh. I am not married and living with my parents. Should I buy now or wait till I am married?
You should purchase a life insurance policy for yourself as soon as possible. As you grow with age, you also have financial dreams that you would like to fulfil for yourself. However, you can never predict what can happen to you in life and you would not want your loved ones to face any sort of financial problems in case of your absence. Also, at the same time, it is always recommended that you purchase a life insurance policy for yourself when you are young as not only you can choose a higher cover amount, the premiums that you will pay will also be cheap and affordable in nature. It is generally recommended that the best insurance product that you can buy for yourself is the term insurance plan. However, you must evaluate your future needs and based on that you should select an insurance policy for yourself. If one of your parents are working then you can most probably select a term insurance plan. However, if you are the sole earning member then you must evaluate your needs not only keeping in mind the needs of your parents but also keeping in mind the needs you will have to fulfil when you will get married and will have kids in future. 28 years is a very good time to purchase a life insurance policy and since you are doing pretty well in your life you are at a very good space to purchase an insurance policy which will provide you with a lot of other benefits keeping in mind your annual salary and the premium which you will be able to pay. You need to properly research and based on your future plans, select an insurance plan accordingly for yourself.
I am a 42-year old man thinking of buying life insurance. The problem is that I have type II diabetes. I have a wife and two children. My children are aged 12 and 10. I don’t have any other loans or liabilities. My financial position is pretty decent and I own the home in which we live. What are my options for life insurance?
It is quite tricky to get life insurance if you are diabetic. Considering your age, your options are very limited for life insurance. Most life insurers in the market may load the premium if you wish to sign up for a life cover. If you have not applied already, make sure that you apply for a lower sum assured amount and smaller term. If you are thinking of securing the financial needs of your children, you may opt for a term cover with a policy term of 10 years. Also, opt for a sum assured amount of Rs.50 lakh. If your application gets turned down by one insurer, it may be a little harder to get it from another one in the market. You may consult with the company directly before submitting a formal application. For the insurance company, the risk is quite high in this case. If you are insulin dependent, this risk gets even higher. So, explore your options in multiple ways before deciding on a specific cover.
I am a 35-year old male working in a private company. I earn about Rs.12 lakh per year. How much coverage will be adequate for me? Also, what are the other things I must consider other than the premium amount?
You can determine the adequate sum assured amount by calculating your family’s future requirements and your current liabilities. Calculate the current expenses of your family and estimate how much they would require for the next 20 or 30 years adjusted for inflation. You must also allocate provisions for your children’s marriage and higher education.
If you have any liabilities like home loan or personal loan, you must add that to the sum assured your family might require. Once you have calculated everything, you can determine the sum assured amount that could keep your dependents covered for the next 20 to 30 years. As a general rule of thumb, most people take coverage for at least 10 times their annual salary. However, the requirement may differ from one individual to another.
The premium amount for your life insurance plan will be influenced by the sum assured amount you choose for your policy. When buying a term insurance plan, you may also consider other factors like company’s claims settlement ratio, add-on covers, special discounts, service quality, etc.
Life insurance covers come with a lot of add-on covers or riders. These covers are said to enhance the coverage offered by a life insurance policy. What is the benefit of accidental death and disability rider? Since life insurance already covers accidental death, what is the additional benefit I can get from this rider policy?
If you buy a life insurance cover with the accidental death and disability rider, the death benefit is twice the original sum assured amount of the base cover. In case of accidental death of the insured, the dependents will get the sum assured amount of the base cover and the sum assured amount of the rider policy. This extra money will help the family avoid the financial insecurities associated with the loss of the primary earner. Also, the additional premium paid for the accidental death and disability benefit is negligible compared to the premium paid for the base cover.
Another added advantage of these policies is that most of these riders also offer disability benefit in case the insured survives the accident. For permanent total disability, the full sum assured amount of the rider policy is paid as a lump sum payout. In case of partial total disability, the insured will get half the sum assured amount chosen under the rider cover. Some of the personal accident covers also have provisions to pay periodic payments in case the insured suffers temporary disability.
Considering the advantages provided here, it is always better to pay a little extra for the accidental death and disability cover if the rider option is provided along with your base life insurance cover. With this enhanced coverage, you can safeguard the financial interests of your family and provide for them in case of your unexpected demise. You may also check out the other riders offered by your life insurer including critical insurance rider, family income protector, loan protector rider, return of premium rider, waiver of premium rider, etc. With the right mix of rider covers, you can enhance the protection of your base life insurance policy significantly.
I am a 26-year old NRI living in London for the last 6 months. I’ve never had life insurance coverage till date. I don’t plan on settling in London, and I would most likely come back to India in about 5 years. Can I buy life insurance in India while living as an NRI in London? Also, are there any single-premium policies available for life insurance covers? I am worried that I might forget to pay the annual premium when it is due. Please help.
As per the guidelines issued by IRDAI, NRIs can buy life insurance policies in India. They may contact the company directly through email or phone and get more details about the policy. Some companies like LIC even have a dedicated NRI center to provide service to policyholders living abroad. So, buying life insurance in India is not a problem even if you are living in London for the time being. The only condition here is that you must not relinquish your Indian citizenship anytime soon. In your case, that is not a problem.
Life insurance covers are available as single premium policies as well as regular premium policies. Single premium policies typically require a huge upfront payment for the desired coverage you intend to have. You may opt for it if affordability is not a concern for you. If you are worried only about missing premium payments, you can rest assured that there are easy ways to tackle it. Most insurers allow you to automate premium payment through your NRO or NRE accounts if you are paying the amount in Indian rupees. Also, they send regular reminders at the time of policy renewal to keep you informed. If you are opting for regular premium payment, you need to pay the premium within the grace period to avoid lapsation.
I am a 38-year old working professional who has two children. I have a term insurance cover for Rs.2 crore. My wife and children are already named as nominees in the policy. I have a 32-year old brother who is also a working professional. Can I also include my younger brother as a nominee? Are there provisions to include family members who are not financially dependent on me?
You can include any of your family members as your nominees irrespective of their financial dependency. There are no specific rules that say that a nominee must be financially dependent on you. However, insurance rules state that only your parents, spouse, and children can be nominees. Your brother will not be considered as your legal heir in this scenario. It is, however, possible to include your brother as a non-beneficial nominee through a Will.
You may have to discuss this with a lawyer while drafting your Will. You also need to consult with your family members to avoid any future hassles. Once your brother is included in the Will, he will receive the benefit as per the Will.
I am a 25-year old working professional who has just started my career. I earn Rs.6 lakh per year. How much life insurance will be adequate for me?
Most industry experts state that your insurance should be at least 10 times your annual income. Going by this rule, you need to have coverage for at least Rs.60 lakhs. Since you are just starting your career, this coverage will take care of your education loan and other liabilities. You may take a higher or lower amount based on other factors such as affordability, liabilities, family dependency, etc. Your insurance requirements may increase as you age. In that case, you may subscribe to additional covers as per your requirements. In addition to term plans, you may also check out other types of insurance covers like endowment plans, retirement plans, child plans, ULIPs, etc.
I travel abroad frequently for work-related purposes. I have a life insurance cover for Rs.5 crore. Will my life insurance policy provide coverage even when I am abroad?
All life insurance covers taken in India have worldwide coverage except under some special circumstances. Even if the policyholder dies abroad, his/her dependents will get compensation from the policy. For all policies taken in India, the compensation amount will be provided only in Indian currency. The dependents of the insured must submit the appropriate documents while making the claim from the insurer for death in a foreign country.
What is a convertible life insurance policy? My agent has given me the advice that a convertible policy will be suitable for me. I am a 28-year old person working for a private company. Can I opt for this?
A convertible policy is basically a term insurance plan that can be converted to an endowment policy based on your future requirements. The insured does not have to go through any medical check-up at the time of conversion. This is a major advantage of this plan. There is no downside in opting for a convertible policy as long as the premium amount remains the same. Paying a higher amount just for the conversion facility is not recommended. Since endowment plans focus mainly on investment, a new cover can be bought at any age.
Another key thing to be considered here is that the conversion is not mandatory. As long as it remains optional, you can make a decision accordingly. You may go ahead with your agent’s advice but read the policy document carefully and make sure that all the other factors are acceptable to you.
I am a 38-year old software engineer working for a private company. My wife is also a working professional employed in another company. Our combined monthly earning is around Rs.1.20 lakh. We both have term insurance plans for Rs.1.5 crore and Rs.1 crore. We have recently taken a joint loan to buy a resale apartment for around Rs.50 lakh. We have decided not to opt for a loan protector insurance policy on this home loan. In this case, would you recommend buying an additional insurance cover for Rs.50 lakh?
Liabilities are normally taken into consideration while buying term insurance policies. Since you both already have term plans, you may have to consider purchasing another insurance for the outstanding loan. Your term plans take care of your family’s requirements and financial needs in case of an unexpected death. This new loan is not taken into account while opting for that plan.
In this case, you may opt for a credit life insurance for the outstanding loan amount. One of the features of the credit life insurance is that the insurance premium decreases proportionately as and when you pay off the outstanding loan. Here, you can purchase the policy for the number of years of your outstanding loan payment. When you pay the loan amount every year, the insurance premium decreases along your liability.
If you are not sure about purchasing a credit life insurance, you may also opt for another term plan for Rs.50 lakh. Check the premium amount you have to pay in both cases and make the decision accordingly.
I am a 40-year old government employee earning Rs.55,000 per month. I have adequate investments in mutual funds and pensions plans for my future needs. I own the home in which I live. I am thinking of taking a plan for my daughter’s higher education. I need to pay for it in another 15 years, and I would like to have around Rs.25 lakh for this. What type of investment will be suitable for me? Also, how much should I invest every year to achieve this goal?
Child plans are specifically designed for this purpose. Almost all the top insurance companies in the market offer child plans focused on children’s education and marriage needs. You can check out these plans and choose the best one suitable for you. One of the unique features of child plans is that the insurer will take care of the premium payment if die unexpectedly during the policy term. Once the maturity period is over, the full sum assured amount will be paid to your daughter. Hence, your investment is protected under this plan.
For your requirement, you may opt for Rs.25 lakh in sum assured and start paying premiums according to the plan. The investment may vary from one insurer to another. You can use the EMI calculators in the official websites of insurance companies to know the exact amount you have to invest in a child plan.
How do life insurance companies determine the maximum insurance amount one can get? If I already have a life insurance plan, will it affect the application of another cover?
Life insurance companies use various measures to determine the insurability of a person. The annual income of a person is one of the major factors taken into consideration. When you apply for a certain amount, the company will determine your human live value (HLV) before providing you with the coverage. This is a value calculated based on your existing income, expenses, assets, and liabilities. Other factors like age, health condition, occupational risk, smoking habits, etc., are also taken into consideration while determining the insurability of a person. The company’s decision to provide coverage will be based on a combination of these factors.
If you already have an insurance policy, you are within your rights to apply for a second insurance policy. However, the company will consider your existing policy while determining your HLV. If your application exceeds your HLV, the company may provide you with a lower sum assured option. So, in a nutshell, the sum assured you ask for may not be the sum assured the company will be willing to provide you.
I am a 43-year old software profession earning Rs.65,000 per month. I have invested in various saving plans and mutual funds. I am thinking of buying a term insurance plan for the next 15 years as I plan to retire at the age of around 60 years. The problem is I am a diabetic. Will I get life insurance coverage with this condition? If yes, will it be too costly to afford?
Getting life insurance coverage with diabetes depends mostly on the extent and severity of the disease. For instance, if you are dependent on insulin every day, you may have to pay a significantly higher amount compared to others. If it is diagnosed at a very early stage, it is possible to get coverage with just a little premium. However, if it is severe, the cost of coverage could be a lot higher. Premium loading might be applied based on the present stage of the disease. Insurers typically apply premium loading based on the level of risk. Diabetes may not be a life-threatening condition anymore, but it comes with its own risks.
You may opt for other options like lower sum assured amount or lower policy term to get coverage at a lower amount. If you are looking for life insurance coverage for 15 years, it is bound to get costly. While diabetes is one factor, other factors like income, age, policy term, sum assured amount chosen, occupational risk, smoking habit, etc., may also be considered while pricing a policy. Get quotes from multiple insurers in the market before choosing the one that you can afford.
Is it possible for me to take life insurance coverage for myself, my spouse, and my child? Are there any joint life insurance options available for us?
Life insurance companies provide coverage for a child immediately after birth. One thing to note here is that the income of a person is taken into consideration while determining the sum assured amount. Hence, you may not get the desired sum assured amount for your spouse and child. Check with the company regarding the coverage available. If your spouse is also an earning member, there will not be an issue in getting life insurance coverage. If protecting the future of your child is your main agenda, you may buy separate coverage for yourself and your spouse and nominate your child as the beneficiary.
Joint life insurance policies are offered by some of the top insurance companies in the market. Here, you can get coverage for yourself and your spouse under one single policy. There might be some restrictions imposed by the company when you opt for joint life cover. Make sure that you read the policy’s terms and conditions carefully before you purchase a policy.
I am a 22-year old guy who has just started my career. I have dependent parents who need my support. What is the best time for me to buy a life insurance policy?
Life insurance is something that must be bought as early as possible. Since you have dependent parents, you may have to buy life insurance immediately to protect their future needs. When you have spouse and children in the future, your responsibilities are going to increase more. The main reason to buy early is to take advantage of the cost discount. The cost of life insurance is much lower when you buy at a young age, and it remains the same throughout the policy term.
You can opt for a term insurance plan right away. It is not going to cost much for someone of your age. With this coverage, your parents will be financially secure and your liabilities can be taken care of if something untoward happens to you. If you need more insurance in the future, you may also opt for a second cover based on your higher income and higher responsibilities.
|Life Insurance Riders: Importance|
Life insurance is an agreement between the insurer and the insured to offer financial protection to the insured’s dependents. In case the insured person passes away, the sum assured as agreed upon by the insurer and insured is provided to the insured’s nominee or legal heir.
Life insurance companies, along with the basic death benefit, offer many other benefits if the policyholder has chosen certain riders. A few of the riders offered by life insurance plans are:
Importance of life insurance riders
Life insurance riders can be availed along with the base insurance plan by paying an additional premium. Here’s why life insurance riders are beneficial to the insured person:
Instead of buying a whole life insurance policy or an endowment policy, you could purchase a term plan and attach riders to get comprehensive life insurance coverage.
|Life Insurance for people with a medical condition|
Most financial advisors will recommend that you should purchase a life insurance policy when you are young since the premiums you will pay will be cheaper as compared to what you will have to pay when you are old. Also, when you are young, the chances are high that the insurance company will not ask you to undergo any medical test. The premium decided during the entry will also remain constant throughout the policy term. These are some of the reasons why you should purchase a life insurance policy when you are young.
However, you may look to purchase a life insurance policy if you suffer from any form of terminal illness. Most insurance company thus refrain from providing insurance if you suffer from any critical illness. It is not much of a problem for you to get coverage if the illness is manageable or treatable. However, if the condition is serious or you suffer from a pre-existing disease, the insurance company may not be willing to provide you insurance or will charge you higher premiums since the risk of providing you coverage by the insurer is extremely high.
There are certain conditions which are excluded by most of the insurance companies in India. They are:
However, an insurance company cannot deny coverage to you if you are an existing policyholder. The insurance company thus expect you to declare your condition prior to signing up for the policy. If you are above the age of 45, you will be required to undergo medical tests, during which if it is revealed that you suffer from any of the excluded condition, the insurance company has the right to deny you life insurance.
There are certain conditions for which you will be provided life insurance coverage but will also be required to pay higher premiums. Some of the conditions for which you will receive life insurance coverage are:
Hence, these are some of the conditions for which you may have to pay higher premiums. Though there is no standardisation when it comes to calculating premiums for a scheme, it is recommended that you get multiple quotes if you suffer from any of the medical condition mentioned above. You must properly compare and based on the price quoted you can then choose a suitable life insurance policy for yourself.
|Life Insurance for Armed Forces in India|
You may have often heard that how important it is to have a life insurance policy. However, life insurance companies may often refrain from providing insurance policies to certain individuals due to the risky nature of their jobs. People who are associated with jobs where the chances of meeting with death or getting critically injured are significantly high, face lot of problems when they wish to purchase a life insurance policy for themselves. This also includes police personnel or people who work for armed forces. Since it is difficult for them to avail a regular life insurance policy for themselves, they can purchase specially designed insurance policies for themselves.
Army Group Insurance Fund (AGIF)
The Army Group Insurance Fund (AGIF) was created by the Armed Forces so that the members could receive the benefits of having insurance. Funds very similar to AGIF is also available for those who are in Air Force and Navy. AGIF was formed without having any tie-ups with the Life Insurance Corporation (LIC) of India or any leading insurance company in India. The premium payable is deducted directly from the cadet’s salary, and the coverage provided depends on the rank of the person in the army. The premium payable also varies accordingly.
An army official is currently eligible to receive a life insurance cover worth Rs.40 lakh, while an army jawan is eligible to receive a cover worth Rs.20 lakh. An army official in order to avail the benefits of the insurance cover has to pay a yearly premium of Rs.4,000, while an army jawan pays a yearly premium of Rs.2,000. In case of death of the army personnel or a jawan, the family of the bereaved receives the cover amount. During the time of superannuation, the insured can receive adequate compensation under this cover.
Insurance coverage provided by some of the insurance company
People who are a member of the Armed Forces in India play a huge role in the welfare of the country and ensures that our country remains protected from enemies both foreign and domestic. However, their job is risky in nature and the chances of them getting critically injured or dying are extremely high and hence the need for insurance is a must for them. However, a majority of insurance companies in India are not willing to provide insurance coverage to those who are a military personnel, or ex-servicemen in India. The options mentioned above, however, provides the best life insurance coverage to people who are associated with military and Armed Forces in India. However, another member of a military personnel family who is not actively associated with the service can avail a regular life insurance policy for themselves and will not face any problem when looking to purchase a regular policy for themselves. The plans mentioned above are some of the most brilliant plans designed for those who are military personnel and provides adequate coverage and ensures that the person and his family do not bear any kind of financial trauma.
|Life insurance for high-risk professions|
When it comes to life insurance policies, there are various factors that are looked at before a premium is quoted to an applicant. The cost of a life insurance policy is often determined based on your age, income, profession, smoking habits, health conditions, location, etc. Also, your risk associated with your job also determines the premium you will have to pay in order to avail a life insurance scheme. The classifications of these jobs and the premiums you will pay will differ from insurers to insurers in the market. However, the cost of the premium related to your life insurance policy will increase based on the risk associated with your job.
A high-risk job can be a job where the possibility of meeting with an injury or death is significantly high. However, most people are unaware of whether their job is of high-risk or not. For example, a construction worker may not realise his/her job to be risky in nature, until and unless he purchases a life insurance policy. What constitutes to be a high-risk job differs from insurance companies to insurance companies. Jobs such as the one where you have to deal with hazardous chemicals or work under circumstances where the possibility of you getting injured or meeting with death is high are constituted as high-risk jobs.
Some of the high-risk jobs that you can come across are:
The professions mentioned above are considered to be of extremely high risk in nature. Various insurance companies have a list of professionals they exclude from their coverage list. Hence, it is important that if you are someone who is related to any of the professions mentioned above, you thoroughly read the documents and look for the exclusions under the policy before signing on the policy document. In case you purchase a private life insurance policy, it is advisable that you get quotes from multiple insurance companies in order to receive possible discounts on the premiums you will have to pay.
|Life insurance for smokers|
A life insurance product is designed to provide cover to you and ensure that in case something happens to you, the future of loved ones is safe and secure. However, there are certain requirements that you will have to fulfill before you sign up for the policy. People who do not smoke or drink do not face any problem, but those who do are required to declare it to the company in order to avoid problems related to claims in the future. The cost of the insurance cover will depend on whether you declare yourself to be a smoker or not.
Regardless of any type of insurance product, you avail for yourself if you are someone who smokes and drinks, it is mandatory for you to let the insurance company know regarding the habit. If you fail to declare this habit of yours, and your death happens due to smoking or drinking, the insurance company has the right to deny the nominee appointed by you the claim.
The financial security of your loved ones will heavily depend on whether you are declaring to be a smoker or not. If you conceal the fact that you have the habit of smoking or drinking from the insurance company, it can heavily affect the future of your loved ones from a financial point of view. Hence, it is important that you let the insurance company regarding your habit of smoking or drinking without fail in order to avoid any complications related to claims. It is understandable that the premium a smoker will pay will be higher than what a non-smoker will have to pay. In extreme cases, the insurance company may reject your claim, if you suffer from a severe pre-existing condition.
Most people have this misconception that if you are an occasional smoker, the insurance company will levy different charges for those who smoke frequently. However, the insurer will impose the same rates for an occasional smoker which will be applicable for a frequent smoker. Apart from smoking cigarettes, consuming any form of tobacco product will have to be declared by you. You will have to pay additional charges if you are known to consume any form of tobacco products.
It is understood that you will have to pay slightly higher premium rates if you are known to smoke or drink. The reason is that a smoker is prone to various health conditions including respiratory and health conditions. Apart from that, a smoker is also a higher risk to suffer from cancer and thus has a higher chance of dying prematurely. Hence, the coverage for a smoker is higher as compared to a non-smoker and thus the premiums are also higher.
If you are someone who used to smoke earlier, it is important that you let the insurance company know as well. The insurance company will consider various factors before quoting the rates applicable to you. The time that has passed since you smoked a cigarette will also be considered while calculating the new premium rates for you. In short, the longer you wait, better the chances of you being quoted lower premium rates. However, various insurance companies will quote lower premium rates to those who have not touched a cigarette for a minimum of 6 months. If you are someone who hasn’t smoked for a year, you can expect some really good deals from the insurance company.
If you are availing an insurance policy and paying the premium rates applicable to a smoker, and decide to quit midway, you can inform the insurance company about it. You can ask your insurer to consider the premium rates now that you are not smoking anymore. Though insurance companies may follow different rules when it comes to recalculating the premium rates, however, the chances are high that they will consider your request. Your new premium, however, will be calculated depending on the time for which you have quit smoking.
In short, the premium you will pay is also directly proportional to your smoking habits. Regardless of which plan you avail for yourself, concealing the fact that you smoke will be considered as an act of fraud. The insurance company on learning that you withheld an important information has the right to deny your nominee the claim in future. Hence, make sure to declare your smoking habits even if it means paying higher premium rates.
|Life Insurance Free-Look Period|
The Insurance Regulatory and Development Authority of India (IRDAI) has created a regulation wherein every life insurance company is required to provide at least 15 days as the free-look period to every policyholder. However, if the policy was bought through distance marketing, the policyholder will get 30 days to review the policy.
The free-look period essentially begins from the very first day when the policy was issued. During the free-look period, the policyholder can go through all the terms and conditions and evaluate the features and benefits offered to him/her. In case he/she is not satisfied with the policy, he/she can return it during this period and receive a refund of the premium paid.
If a policyholder decides to return a policy during the free-look period, he/she will be required to inform the insurance company and state the reason for returning the policy, in writing. Details regarding the policyholder and the policy, as well as other basic information as requested by the insurer, are to be submitted to them.
The insurance company, in most cases, will accept the request and refund the initial premium paid after deduction of stamp duty charges, the risk premium for the policy period covered until cancellation, and the cost of pre-medical examination of the insured.
Usually, insurance companies return the premium amount within a period of 2 weeks.
|List of Tests To Be Conducted Before Purchasing a Life Insurance Policy|
Certain life insurance companies may request an applicant to undergo a medical examination before issuing the policy to him/her. In most cases, older individuals above a specific age bracket or those who choose a high sum insured will be requested to take certain medical tests and submit reports of the same to the insurer. Apart from that, individuals may also be asked to provide a medical report in case they have some medical issues.
List of tests to be undergone for a life insurance policy
Medical tests are basically conducted to check the health condition of the individual. It will help determine whether he/she is prone to health diseases or not.
A few of the tests that are required to be tested for a life insurance policy to be issued are:
While the tests mentioned above are a standard set of tests requested by most insurance companies, an insurer can decide if it needs only some of these tests or all of the tests. Also, in most cases, the insurance company reimburses the amount spent on getting the tests done.
|Policy Lapsation – What does it mean?|
A life insurance policy is a long term contract between the insurance firm and the individual purchasing the insurance plan. In order to keep this contract running, it is necessary for the policy buyer to make regular premium payments to the insurance company. Usually, even if the due premium payment has not been received by the insurance firm within the premium payment date, the insurer will provide the policyholder a grace period of 15 to 30 days to pay the due premium amount. If you pay the premium within the grace period, the insurer will not levy any additional interest charger.
If the due premium amount remains unpaid even during the grace period, your insurance policy will lapse or terminate. However, even a lapsed policy can be revived within a certain number of pre-specified years by paying the arrears with the applicable interest rate. To keep your insurance policy from lapsing, make sure to pay the due premium amount to your insurance provider without any delay.
|Top 5 Ways to Invest Your Money|
In order to increase your savings and create long-term wealth, it is necessary to invest your money in the right financial tools. Listed below are the top 5 ways that you should consider investing your money in.
As an investor, you should make sure to research your options and invest wisely to ensure that your finances grow over time.
|Life Insurance Claims Rejection – What you need to know|
The main purpose of a life insurance policy is to provide financial security to one’s dependents, in case of an unfortunate eventuality. Thus, to ensure that your nominee does not face any hassles at the time of filing the claim, you need to ensure that you don’t provide the insurer any chances to reject or deny your nominee’s claim.
In most cases insurance providers will only reject claims if you have suppressed key information at the time of purchasing your policy. Certain other reasons for claim rejection include misrepresentation of facts, non-payment of policy premiums, coverage limitations, geographical limitations, etc. Thus, when purchasing an insurance policy, make sure to provide all the required information about yourself without withholding any information and to familiarise yourself and your nominee with the policy terms and conditions, to ensure that your loved ones don’t face any financial hassles.
|Unhappy with your life insurance policy? Here’s what you should do|
A life insurance policy is a long-term contract between the policyholder and the insurance company. This essentially means that the policyholder will have to pay the due premiums to maintain the policy, throughout the policy tenure. However, in certain cases, the policyholder might want to discontinue the policy.
Currently, within the life insurance industry in India, there is no option to switch from one policy to another. Thus, if you have a money-back policy and you are dissatisfied with it, you cannot switch to a term insurance policy. However, if your policy has acquired a surrender value, you can surrender the policy and then purchase another insurance plan.
On the other hand, if you currently have a life insurance policy that has not acquired a surrender value, you can discontinue the policy by informing the insurer and then choose another policy. However, in this case, it is likely that you will have to forfeit all the premiums you paid till date.
If you have just purchased your insurance plan, ensure to make the most use of the free-look period by carefully reviewing the terms and conditions of your policy. If you don’t agree with the terms and conditions mentioned in the policy, you can return it during the free-look period and receive the full premium paid, excluding a nominal charge.
|Life Insurance Claims Settlement – What you need to know|
The main purpose of a life insurance policy is to provide financial security to your dependents in case of an untimely eventuality. Thus, when purchasing a life insurance policy, it is vital that you familiarise yourself and your nominee with the insurer’s claim settlement process, in order to avoid any hassles at the time of raising a claim. Read on to know more about the claims settlement process for various life insurance claims:
In order to make sure that you or your nominee doesn’t face any hassles, make sure to follow the exact steps mentioned by the insurer. Further, to expedite the claim settlement process, ensure that the necessary documents are submitted at once and that all information is filled out correctly in the claim form.
|Insurance Policy Premium Payment – What you need to know|
When you purchase a life insurance policy, it is vital that you keep paying your premiums as per the premium payment schedule in order to keep your policy active. If you do not pay your premium within the grace period, your policy can lapse. However, you should make sure to pay your premium amounts only through authorised channels, such as the insurer’s official website, customer portal, or authorised banks, agents, or merchants.
In most cases, you will be able to view a list of authorised premium payment channels on the insurer’s official website and brochure. Thus, when you purchase an insurance policy, make sure to pay close attention to the premium payment channels specified in the insurer’s official website. It is vital that you do not just hand-over your premium to an agent, since not all insurance agents are authorised to collect premiums.
|Time to review your life insurance policy? Here’s what you should check|
A life insurance policy can be truly invaluable in providing financial security to your dependents in case of an unfortunate eventuality. While purchasing a life insurance policy is extremely important, it is equally important to review your life insurance policy from time-to-time.
It is likely that your financial requirements, goals, and premium payment ability are quite different now from what they used to be when you first purchased the policy. Thus, it is essential to revisit your policy frequently to ensure that you and your family still have an adequate level of coverage. One of the best ways to determine whether your insurance policy is still working for you is by asking yourself the following questions:
Life insurance companies offer a number of insurance products to customers such as term insurance plans, whole life plans, ULIPs, endowment plans, child insurance plans, etc. Each life insurance plan offers certain unique benefits that are specially designed to meet certain coverage and financial needs of the policy buyer. Each type of life insurance product has its own benefits. Thus, you will have to make sure that your life insurance policy still meets your needs.
The sum assured is a certain amount of money that will be paid to the nominee in case of the policyholder’s untimely death. If it’s been a while since you purchased your policy, it is advisable to check if the sum assured is still sufficient to meet the needs of your dependents.
The type of payouts offered to you will vary based on the type of life insurance product you choose. For example, a term plan only provides a death benefit. In comparison, an endowment policy can provide a death benefit or a maturity benefit based on the eventuality. Thus, it is essential that you check if the payouts offered to you are still in-line with your long-term financial goals.
The premium payable is linked to several factors including your age at entry, sum assured opted for, riders chosen, policy tenure, etc. Further, the premium charged will vary from insurer to insurer. Thus, it is essential that you check if the premium that you currently pay for your policy is a fair price or if you are being overcharged.
A life insurance policy is a must-have at all times if you wish to ensure that your loved ones are financially secure, even in case of an unfortunate eventuality. Given how important a life insurance policy can be, it is highly recommended that you review your policy regularly to ensure that it still meets your needs.
|Mutual funds that offer life cover|
Certain asset management companies like ICICI Prudential, Aditya Birla Sun Life, etc. offer a life insurance cover for free if customers opt for certain specific mutual fund/systematic investment plan (SIP) schemes. Listed below are certain key features of such life insurance covers:
Insurance companies can decide if agents are eligible to receive hereditary/renewal commissions
Insurance firms, even to this day, rely quite heavily on agents for business. If an agent sells you an insurance policy, the agent is eligible to receive a commission for the same. In addition to receiving a commission for selling the policy, agents, in the past, also received a cut when the customer renewed the policy and paid the renewal premium, regardless of whether they had a role to play in the customer’s decision to renew the policy. This type of a commission is called a renewal commission. If the insurance agent passed away, a similar commission, which is called the hereditary commission, would be paid to the agent’s nominee.
This law was, however, amended after the Insurance Laws Amendment Act, 2015, was passed. Currently, insurance companies can decide whether or not to pay the renewal/hereditary commission to an agent/nominee based on the agent’s role in servicing the policyholder’s insurance plan. As of today, certain insurance companies pay a commission to insurance agents for making a sale, but choose not to pay hereditary or renewal commissions since the role of the agent is quite minimal after the initial sale is made. Similarly, there are also insurance firms that pay a hereditary commission, but don’t pay renewal commissions. Certain other insurance firms have continued to pay both the hereditary and renewal commissions.
|Why is April a good time to purchase a Term life insurance?|
People generally make the mistake of buying term insurance plans towards the end of the financial year since one looks to save on taxes. But, April is generally the best time to buy an insurance plan for oneself due to many reasons.
First of all, April is the time when the new fiscal year starts, new accounts are opened and everything starts from scratch and also when one can reassess their financial needs. For an employee, April is the month when they get their bonuses and appraisals due to which one can purchase an insurance policy for themselves.
It is easier to buy a plan in April since its the lean period for insurers and hence they would be able to give you more attention regarding the queries you may have prior to buying one.
Hence, April is the best time for an individual to reassess their needs, study the products they are interested in properly before deciding to go ahead and buy an insurance plan.
|LIC Online Payment|
LIC, a company that is well-known for their customer-centric offerings, provides policyholders the option to make premium payments through a range of online and offline channels. To learn how to pay your LIC policy premium through the insurer’s official website, via authorised franchisees and merchants, or through Corporation Bank and Axis Bank branches.
Life insurance, as you may know, is beneficial if you want to protect the future of your family in case something happens to you. Apart from that some policies also offer you the option of both insurance and investment, but did you know that your life insurance policy can also help you save taxes. How can your insurance policy help you in saving taxes?
Life Insurance Industry 2019
The overall industry average for the fiscal year 2017-18 declined marginally to 97.68% from 97.74% during the fiscal year 2016-17. Despite this decline in overall claims paid ratio, the private life insurance industry witnessed a substantial increase to 95.24% from 93.72% in claims paid ratio. Moreover, the report also indicated that 21 of the total 24 life insurers in the industry have claims paid ratio over 90% during this fiscal year.
Claims paid ratio refers to the ratio of total number of claims paid by an insurer against the total number of claims initiated. In other words, a claim settlement ratio of 98% means that an insurer has settled 980 claims out of the 1,000 claims filed by customers. Companies with high claims paid ratio are favoured by policyholders since the chances of claims getting rejected are very low.
The percentage of claims repudiated/rejected has come down significantly during the current fiscal year. In the private life insurance industry, the percentage of claims repudiated stood at 3.97% for the fiscal year 2017-18 compared to 4.85% during the same period of last year. In the overall industry, the percentage of claims reputed declined to 1.10% from 1.45% in the previous year.
Mutual Funds with Free Life Insurance – Should you opt for it?
Of late, many mutual fund houses have started to offer free life insurance covers to individuals who opt to invest in Systematic Investment Plans. While this may seem like an interesting benefit to those who are looking to earn market-linked returns by way of investing in mutual funds, it is important to remember that it beneficial to also have an independent life insurance cover for yourself.
A life insurance policy can help you provide financial security to your dependents in case of an unfortunate eventuality. Having an independent life insurance policy with an adequate sum assured will help you ensure that the financial needs of your dependents are taken care off, regardless of what may happen in the future.
Life Insurance & Suicide
Dealing with the loss of a loved one is one of the most difficult thing which anyone can go through. It not only wrecks an individual emotionally, and mentally, but often, also physically. One of the many causes of death in India is suicide. 17% of the 8,000,00 suicides which are committed globally, are committed in India. What is alarming, is that the rate of suicides in the country only seems to be rising with passing time. So much so, that India has now come to be included among the top 12 countries with respect to the number of suicides committed yearly.
The loss of an income earning member of the household can not only be emotionally traumatizing but also lead to adverse financial consequences. The life insurance payout, which is often the sole financial security for the future of the grieving family, is not payable as per standard life insurance exclusions if death has been caused following a suicide.
Revision in Suicide Clause By IRDAI
When it comes to life insurance, one must never forget, that it is not charity, but a business. As a result, insurers tend to exclude several life-related preventable risks by categorizing them under exclusions, for which the policy does not make a payout. This can be especially negative, in case of suicide, where the family has not only lost an earning member, but also the hope of being able to secure their future with whatever funds they receive under the policy payout. To remedy this, the insurance regulator, IRDAI (Insurance Regulatory & Development Authority of India) made a revision in the regulations governing the suicide clause in insurance policies, which came into effect starting 1 January 2014.
Policies Issued Before 1 Jan 2014
For life insurance policies that have been issued before 1 January 2014, the suicide clause governs that in case the life assured has committed suicide within a year of policy commencement/policy revival, either in a sane or insane state of mind, there will not be any claim payout, and the policy shall turn void. However, if the policyholder dies following a suicide after a year of policy commencement/revival, the death benefit shall be payable then. Certain insurers do provide cover for death due to suicide, but on the condition of a waiting period, which is usually 2 years or more.
Policies Issues Post 1 Jan 2014
Following a revision in regulations governing the suicide clause, changes have been made to different types of life insurance policies.
How Are Third Parties Affected
In an event where the policyholder, who has taken a loan against their life insurance policy, commits suicide, the loan will be repaid by the insurer, who will be liable to prioritize the interests of the third party, be it a bank or a housing loan company. However, this arrangement is subject to the condition that the insurer must have acknowledged receiving the notice of policy assignment one month before date on which the policyholder has passed away.
Suicide & Group Insurance
Claim payout in the event of death for a group insurance plan will be decided by the employer/organization which has provided life cover to its employees. In this case, the employer is the master policyholder, and employees are the ‘group insured’ or beneficiaries. Unless the employer has chosen otherwise, death due to suicide will not result in a death benefit payout.
Keep in mind
Linking your Insurance Policies with Aadhaar and PAN
The Insurance Regulatory and Development Authority of India (IRDAI) has made it mandatory for policyholders to link their insurance policies with their Aadhaar card and PAN. Insurance firms – both life and general – have been asked by the regulator to implement rules for the same without delay. Due to this, many insurance firms have started to ask customers to update their KYC details, including the Aadhaar card and PAN.
Thus, in order to avail any financial service including insurance, it is mandatory for every policyholder, regardless of what policy they have, to link their Aadhaar and PAN at the earliest. In case one doesn’t have a valid PAN (Permanent Account Number), the individual can submit Form 60/61 in its place. Form 60/61 is submitted by people who don’t have a valid PAN when they are making a transaction that requires them to quote the PAN.
This new rule came into effect after the Central Government. vide gazette notification dated 1 June 2017, notified the Prevention of Money-Laundering (Maintenance of Records) Second Amendment Rules, 2017, making the PAN/Form 60 and Aadhaar mandatory in order to avail any financial service. The Insurance Regulatory and Development Authority of India (IRDAI) further clarified that this rule will be applicable to all life insurance and general insurance firms, including standalone health insurance firms.
The IRDAI was formed by an act of Parliament in order to protect the interests of policy buyers and to ensure that all policyholders are treated fairly. The IRDAI’s 10-member committee consists of a chairman, 5 full-time members, and 4 part-time members. Currently, India has 24 life insurance firms and 33 general insurance firms (which includes standalone health insurance companies) that are operating in the country.
Postal Life Insurance is a life insurance scheme that was initially offered only to postal employees. With time, the scheme was extended to other government organisations such as the telegraph department, P&T department, government-aided educational institutions, nationalised banks, and so on. Offering coverage to the para-military forces and defence services, more than 46 lakh policies have been issued as on 31 March 2017. The Directorate of Postal Life Insurance not only provides individual policies but offers group insurance schemes to extra departmental employees such as those serving under the Gramin Dak Sevaks.
With more than 1.5 lakh branches in the country, India Post offers the Postal Life Insurance to the remotest areas of the country. There are six different plans available under Postal Life Insurance that differ in the salient features and the sum assured amounts offered under each of them. The six plans under Postal Life Insurance are:
These plans not only provide the nominee with a death benefit upon the death of the assured but also provide financial assistance on a regular basis depending on the type of plan chosen.
The rural postal life insurance scheme was created as per the recommendation of the Malhotra Committee which observed that only 22% of the Indian population was covered by life insurance policies in 1993. Also, only 10% of all savings instruments constituted life insurance bonds. In order to increase the insurance penetration, as well as increase awareness about the importance of life insurance among the masses, the rural life insurance scheme was introduced for the rural populace of the country.
India Post was picked to carry out the life insurance scheme as it was believed that the post masters of rural areas were highly respected and trusted. The people of the rural regions would, hence, understand the importance of insuring one’s life and also using it as an instrument to save for the future through them. The vast network of India Post would also benefit the cause of spreading awareness and increasing the life insurance penetration.
As many as 146 lakh policies have been issued until 31 March 2017 under Rural Postal Life Insurance. There are six plans available under the Rural Life Insurance scheme, they are:
The different insurance plans offered provide the benefit of covering a person’s risk as well as using it as a means to save for the future.
WANT TO TAKE ACTION?
Looking to purchase a life insurance policy? When making a decision so important, don’t forget to compare premium quotes from leading life insurance providers in order to get the best coverage at the best rates. Get instant premium quotes, compare premiums and policy features, and do a lot more, only on BankBazaarInsurance.com! We’ve got you covered!
WANT TO DIVE DEEPER?
Term Life Insurance plans, a popular choice among policy buyers, provide a comprehensive risk cover with a high sum assured at low premium rates. What’s more, you can also customise the sum assured, select an optimum policy tenure, and avail tax benefits, with a term life plan.
WANT TO EXPLORE RELATED?
A cancer insurance plan provides the policyholder much-needed financial protection in case he/she gets diagnosed with the deadly disease. Purchase a cancer insurance plan today and ensure that you stay financially prepared no matter what happens in the future.
A health insurance policy can provide a comprehensive cover against expenses that one might have to incur in the event of a hospitalisation/medical emergency. With healthcare costs rising year-on-year, purchasing a health insurance cover can provide you peace of mind and a sense of security. Available in various types with varying features and benefits, opting for the right health insurance cover couldn’t get easier.
EXPLORE HERE FOR OTHER INSURANCE PRODUCTS
It provides you protection against accidents, personal accident, theft, third-party damage, own, damage, natural calamities and man-made calamities. You can buy either third-party liability cover or comprehensive cover. However, a comprehensive two wheeler insurance policy is what one should ideally buy. Owning a two wheeler insurance is no less than having a medical insurance as it takes care of your hospital expenses in case of an accident.
Car insurance is an agreement between the insurer and the insured where the insurer promises to cover the policyholder’s liabilities at the time of a mishap in exchange for a small premium.Car insurance plans are of two kinds, Comprehensive Car Insurance plan that covers the third-party liabilities as well as own damage liabilities and Third-party Liability Car Insurance Plan that covers third-party liabilities at the time of a mishap.
Edelweiss Tokio Life Insurance, a leading insurance firm in the country, has registered the highest claims paid in terms of the benefit amount during FY17-18, as per the Insurance Regulatory and Development Authority of India’s annual report for 2017-2018 .
The insurer’s claims paid in terms of the benefit amount came up to almost 98%, in comparison to an industry average of around 93% during the period under review. The company has surpassed other private-sector life insurance companies by around 1,000 basis points and LIC by more than 330 basis points.
6 February 2019
US-based MetLife, Inc. is considering purchasing an additional stake in PNB MetLife India Insurance Company from its Indian joint venture partners after its initial attempt at unlocking value through an IPO was put on hold.
PNB MetLife had filed for an initial public offering in August last year, with an intention of listing in January 2019. The listing, however, did not go through due to certain market conditions, which, in turn, resulted in a few senior-level exits. The insurance firm has now decided to list after the general elections this year, given that the market is expected to stabilise by then. The insurer has informed its employees about the plan to delay the listing.
PNB MetLife was formed in a partnership between Punjab National Bank, MetLife, Elpro International, M Pallonji & Company, and Jammu & Kashmir Bank. As on 31 March 2018, the company had an embedded value of Rs.3,400 crore. Based on the estimates, the company is valued between Rs.8,500 crore and Rs.12,000 crore.
1 February 2019
Formed following a joint venture between Andhra Bank, Legal and General from the United Kingdom, Bank of Baroda, India First Life Insurance has just bought a 9% stake in CSC e-Governance Service Limited which is controlled by the Government of India’s Ministry of Electronic and Information Technology, which is the core of India’s Digitization initiative. According to the CEO of India First Life Insurance, he said that the company decided to buy a 9% stake in CSC e-Governance because they look forward to spreading their products to all parts of the country, especially to those from the rural areas, and spread the awareness of risk management through life insurance products. As of now, CSC has over 2.5 lakh centers and have been working with the insurer to spread awareness about risk management. Having a share of CSC was the right way forward for India First Life Insurance according to their CEO. In his words, he said, the stated objective of India First Life is to reach out to the masses and underserved customers with simple, easily accessed risk management solutions. The CEO of CSC replied by saying that the two entities (CSC and India First) have worked towards enabling village-level entrepreneurs for reaching out to the last mile customers with tailored solutions. He concluded by saying that he looks forward to strengthening the bond between the companies.
30 January 2019
Insurance company, HDFC Life, saw its profit rise by 18.47% to post a net profit of Rs.245.63 crore for its third quarter ending December.
The company’s net premium income increased by 27.3% in the third quarter of the fiscal year 2019 from Rs.5419.9 crore it posted in the third quarter of the fiscal year 2018 to Rs.6897.7 crore for the third quarter of the fiscal year 2019.
The new business premium which is basically the combination of group business premium and individual business premium rose by 41% from Rs.7,065 crore in the first nine months of the fiscal year 2018 to Rs.9,940 crore in the first nine months of the fiscal year 2019.
The lower mark to market gains in the unit-linked segment caused the income from investments to drop from Rs.9,531.42 crore in the fiscal year 2018 to Rs.5,271.84 crore in the fiscal year 2019 in the third quarter ending December.
The solvency ratio was 1.91 with the minimum regulatory requirement being 1.5.
HDFC Life also saw its net worth jump by 31% from Rs.4,359 crore to Rs.5,690 crore.
23 January 2019
Nearly 988 million Indians do not have any kind of life insurance coverage according to the statistics revealed by the Insurance Regulatory and Developmental Authority of India (IRDAI). If this data is true, more than 75% of the country’s population do not have any kind of life insurance right now. The data also revealed that an individual is only assured of 8% of what it would take to protect the family following his/her untimely death.
The report noted that most Indian families do not have adequate coverage for protection against the financial loss resulting from the loss of the primary earner. The scenario is extremely bad on the unorganised sector where workers are exposed to different kinds of risks. Considering that more than 82% of the Indian workforce is employed in the unorganised sector, the number of people with inadequate life coverage is quite staggering.
16 January 2019
In order to stamp her name as the favorites in the elections in 2019, West Bengal’s Chief Minister, Mamata Banerjee announced that every farmer in the state will receive a insurance coverage under the Krishak Bandhu scheme. According to the Chief Minister, every farmer in the state will receive a state sponsored life insurance coverage of Rs.2 lakh every year. In addition, every family will receive Rs.5,000 per acre of land of cultivation from the government. According to the Chief Minister, there are about 72 lakh farming families in the state. Banerjee was reported as saying West Bengal has a vast stretch of agricultural land. We have 72 lakh families who earn their livelihood through farming. Our government will provide a financial aid of Rs 5,000 per acre to each of these families every year in two instalments. This includes both farmers and agricultural labourers. She added by saying, All the farmers within the age group of 18 to 60 years will be provided life insurance coverage of Rs 2 lakh by the state government. In case of their death, be it natural or unnatural, the families would be provided the money.
2 January 2019
Numbers that prove that the life insurance penetration in the country is getting deeper, the Insurance Regulatory Development Authority of India has reported that insurers in the country have recorded a premium collection of Rs.1.78 lakh crore in 2018, from Jan to November 2018. According to the Insurance Regulatory Development Authority of India, this is the second highest premium collection in 3 years. In 2017, the premium collections stood at Rs.1.96 lakh crore while in 2016, the premium collection by life insurers in the country stood at Rs.1.69 crore/ However, insurers in the country have reported negative growth with regard to individual single-premium products while non-single premium products recorded a marginal growth. According to a senior insurance official reporting to Financial Express, Amid overall slow growth faced by the industry in this financial year, Life Insurance Corporation of India (LIC) is also facing challenges in individual and groups single premium and group single premium businesses, which is a cause of concern. Based on the IRDAI data, LIC reported premium collections in 2018 of Rs.83, 148 crore, a little more than 7% less than the premium collections the previous fiscal year.
29 December 2018
SBI Life Insurance saw its stock rise and stay high at the close amidst the report that US private equity company Carlyle Group and Sovereign Fund GIC are looking to buy a 10% stake in the insurance company from BNP Paribas Cardif.
BNP Paribas Cardif is selling the SBI Life Insurance stake to meet the regulatory norms for a public float.
The SBI Life Insurance Company saw its stock rise by 5.08% and rally in the last half hour to rise 2.67% or 15 points to close at 589.20 on the Bombay Stock Exchange.
According to a report by the Economic Times, Carlyle-GIC will purchase SBI Life Insurance shares at Rs.510-Rs.520 apiece. The size of the deal is expected to be between Rs.5,100 - 5,200 crores.
The proposal for the sale of the stake will be underway as soon as the Insurance Regulatory and Development Authority of India (IRDAI) gives the green signal.
Citigroup, Kotak Mahindra, and BNP Paribas will take care of the stock sale. Apart from BNP Paribas Cardif, the State Bank of India holds 6.21% stake in the insurance company. The insurer went public in October 2017.
28 December 2018
Private life insurer DHFL Pramerica has received “Pride of the Nation” award from Union Home Minister Mr.Rajnath Singh during the Vijay Diwas function. The company received the award for its community engagement programmes that are being conducted in collaboration with the Indian Army. The company is renowned for its close association with the Indian army and various philanthropic activities.
The company’s Executive Vice President and Chief Distribution Officer, Rajesh Sood, received the award from the Union Home Minister at the event organised by Veterans India Martyr’s Fund. He stated that 34% of DHFL Pramerica’s workforce are ex-servicemen. He also noted that the company takes pride in its deep relationship with the Indian Army.
The Veterans India Martyr’s Fund is an organisation established to honour and provide financial assistance to the family members of martyred soldiers. The organisation focuses on nation building by spreading nationalism and patriotism.
18 December 2018
The average ticket size of life insurance plans has increased nearly 2.45 times in the last 10 years. As per data from Kotak Institutional Equities, the average premium that was collected from an individual customer for a regular payment policy came up to Rs.9,942 in FY09. In comparison, the average premium that is collected by a life insurance firm for a regular payment policy is FY18 was Rs.22,549. During the first eight months of the current financial year, the average premium charged increased to Rs.24,395.
This growth in ticket size indicates that policy buyers are willing to pay a higher premium for life insurance policies. Despite this, a significant gap still exists between the insurance coverage that a policy buyer requires and the sum assured that is actually opted for.
Further, the data also showed that life insurance firms that have banks as partners have a larger ticket size.
Among various insurance companies in the market, LIC’s average ticket size rose from Rs.5,885 in FY09 to Rs.13,943 during the period between April and November 2018. In comparison, for private life insurance companies, the average ticket size increased from Rs.18,686 in FY09 to Rs.52,939 during the first eight months of the current fiscal.
17 December 2018
During the period between April 2018 and November 2018, the life insurance sector collected new premiums equal to Rs.1.23 lakh crore. Private life insurance companies recorded a 23.2% growth in new premium collection taking the amount up to Rs.40,197.86 crore. However, LIC experienced a 7.9% decline in new premium collection as compared to the year-ago period. While the new premium collection is equal to Rs.83,148.64 crore, the overall growth in premium collection has increased only by 0.33%.
Both, the public sector as well as the private sector of the life insurance industry, witnessed a drop in regular premium collection for group policies – by 64.7% and 49.3% respectively. In case of individual regular premium collection, however, the private sector saw an increase in regular premium collection by 9.6% while the public sector saw a drop by 30.6%. Though the numbers in the third quarter were not great for the life insurance industry, they are hopeful that there will be an improvement in the last quarter. Since the fourth quarter is when people have to file their taxes, they purchase life insurance policies to save on taxes. It has been recorded that about 55% of the overall sales in the life insurance sector is witnessed in the fourth quarter of the fiscal year.
14 December 2018