Know About Life Insurance Policies To Secure Yourself & Your Family

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.

• Health – The healthier an individual is the less likely it is for him/her to fall ill. A healthy lifestyle is known to increase the longevity of people, with insurers looking at this before providing a policy. Individuals with medical issues might be expected to undergo tests, with insurance providers having the right to deny an application based on the outcome of these tests. The healthier an individual is, the better are his/her chances of getting a good deal on the premium amount.
• Finances – Individuals with an alternate source of income might think that a life insurance plan is not needed for them. One should consider the current financial situation and future obligations to make sure that a life insurance plan is utilised effectively. As one ages, there are chances for debt to increase, which might prevent one from spending on a life insurance plan. On the other hand, buying a policy when there is no debt can help one utilise resources more effectively.

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.

• Early age/No insurance – The first stage corresponds to the early lifetime of an individual. This phase can be considered to be from the time of birth till the time one reaches an age of 18/19 years. Here, there are no responsibilities/liabilities one has to deal with. On the contrary, this is the period when someone else is spending money on the individual. One can typically say that there is no need for life insurance during this period.
• Youth/limited insurance – This is the age when most individuals begin to venture out. They complete their education, get their first job, stepping into a new phase of life. The liabilities and responsibilities in this phase are limited, meaning that only a limited minority of people in this age bracket opt for life insurance. One could assume this bracket to be in the range of 20 to 25 years.
• Middle age/High insurance – This is the phase when life truly begins to change. Responsibilities increase for most people during this period. One might get married, have children, buy a home, etc. These mean that there are people dependant on him/her. A life insurance plan becomes essential during this stage of life, with most people purchasing it as and when their responsibilities towards others increase. This period typically lasts for around 20-25 years.
• Old age/limited insurance – This is a period when responsibilities reduce. Their children are grown up and are capable of handling themselves, most loans are cleared, and the expenses have reduced. The need for insurance comes down, but this does not mean that it can be avoided. There are still a few requirements which need to be met, which can be done by the policy.

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.

• Annuity – This is a policy wherein an income is provided at regular intervals throughout the lifetime of the individual.
• Age limit – Every individual is expected to satisfy certain age-based criteria. Insurance providers will not offer a policy to people who do not fall within the minimum and maximum age limit bracket.
• Assignment – This is the transfer of the ownership of the insurance policy from the original policyholder to another individual.
• Proposal/Application form – This is a form which has to filled by the individual looking to purchase an insurance policy.
• Claim – This is a notice sent to the insurer informing them about a situation wherein they are expected to pay the nominee/beneficiary, as the case may be.
• Beneficiary – This is the individual who is entitled to receive any benefit from the policy after the demise of the policyholder. A policyholder can choose said person.
• Coverage – This is nothing but the protection provided by the policy. Each policy accords different cover.
• Grace period – Policyholders who fail to pay the premium amount on the due date are provided an additional period of time within which they can make the payment. This is termed the grace period. This period varies based on the premium payment mode chosen by the policyholder.
• Premium – Each individual is expected to pay a certain amount to avail cover under a policy. This is termed the premium. One can view it as the investment one makes to buy the policy.
• Premium payment modes/frequencies – These are the different options available when it comes to paying the premium. In essence, they refer to the frequency of premium payments. The mode options include: monthly, quarterly, half-yearly, or yearly.
• Exclusions – An insurance policy does not provide cover in all cases. Insurers cannot be held liable for payment if demise occurs due to certain incidents. These are termed the exclusions.
• Fiduciary – A beneficiary can choose an individual who can act on his/her behalf. This person is termed the fiduciary.
• Free-look period – Individuals who do not agree with the terms and conditions of a policy can choose to return it within a specified period of time. This period is termed the free-look period.
• Participating policy – A participating policy is one which participates in the profits of the insurance company. Such policies earn a bonus when the company registers profits. The quantum of bonus is decided by the Board of Directors.
• Non-participating policy – This is a policy which does not earn any bonus/partake in the profits of the insurance company.
• Policyholder – This is the individual who owns the policy. He/she might not be actual individual insured under the plan.
• Life assured – The life assured individual is the person whose life is insured under the policy. He/she might not be the policyholder, for an individual can purchase a policy in the name of a different person.
• Paid-up insurance – A paid-up policy is one wherein the death benefit is payable even if future premiums are not paid.
• Lapse – A policy can be terminated if the premium is not paid. Such policies become lapsed.
• Maturity Benefit – This is the benefit the insurer pays to the policyholder on completion of the policy term. Not all policies offer this benefit.
• Death Benefit – This is the amount paid by the insurer to the nominee/beneficiary if the policyholder passes away while the plan is in force.
• Survival Benefit – This is a benefit paid by the insurer to the policyholder after the completion of a specified period of time. The amount is paid while the policy is active.
• Surrender – An individual who does not wish to continue with the policy can choose to surrender/terminate it. This can be done only when premiums for a specified period are paid. The insurer might pay a certain surrender benefit based on the premium paid until date of surrender.
• Maturity date – This is the date on which the policy expires. The maturity amount, if payable, will be paid on said date.
• Moral Hazards – These are certain conditions which the insurance company takes into consideration before providing a policy. These are related to the personal habits/lifestyle of the individual.
• Nomination – The process of authorising an individual to receive the financial benefits of a policy is termed nomination.
• Nominee – The individual who has been nominated to receive the benefits is termed the nominee.
• Reinstatement – A lapsed policy can be reconverted into a regular policy. This process is called reinstatement. This can be done only if certain terms and conditions are met.
• Renewal – This is the process whereby the policy continues to be in force after the premium is paid.
• Rider - A rider is an add-on which can enhance the benefits provided by a base policy.
• Vesting age – This is the age from which the pension is paid to the policyholder in case of a pension plan.
• Underwriting – Each insurer evaluates applications based on certain established guidelines. This is called underwriting.

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.

Pros

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.

Cons

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:

• Financial security: The best part of having a life insurance policy is the financial security it provides. In case something happens to you, the nominee appointed by you receives a lump-sum benefit called the death benefit which helps them in taking care of their day-to-day needs. In case you have purchased a whole life insurance policy, and you survive the term, then you also receive a maturity benefit. There are certain plans such as ULIPs and endowment plans where not only you receive protection but they also allow you to invest your money and receive returns based on your appetite for risk. Hence, life insurance provides financial security and thus becomes one of the major reasons for you to not cancel your policy.
• Protective coverage: The main aim of any insurance policy is to provide you and your family protective coverage. In case something happens to you, you do not have to worry about the future of your loved ones as your insurance policy would compensate them and allow them to take care of their future needs.
• Takes care of financial liabilities: One of the reasons why you should not cancel your life insurance policy is because of the fact that as long as you are earning money, you will have financial liabilities to take care of. You may take a loan so that you can buy a new house or a car, or may have to take care of your children’s education. In case something happens to you, your family may face problems taking care of their financial needs. Your life insurance policy helps your loved ones take care of these financial liabilities and you can have that peace of mind knowing that even if you are not around in the future, your loved ones would still be able to take care of their needs.
• Investment options: There are certain products such as ULIPs or endowment plans where you have the option of investing. You are required to stay invested for a good period of time in order to receive decent returns from the plans. These plans have lock-in periods which means that you will have to pay surrender charges in case you decide to cancel the policy before the lock-in period ends. You must be patient when purchasing such types of products and stay invested for a minimum of five years before you start receiving returns. Hence, due to these reasons, you must not cancel your life insurance policy.
• Premiums become expensive with age: Imagine that you cancel your insurance policy and then decide to purchase another insurance policy. The chances are extremely high that you will have to pay higher premiums as compared to what you might have been paying for the previous policy. Your premiums increase with time and age and hence you must think twice before cancelling your policy.

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.

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:

• Age – The lower the age of an individual the cheaper the premium. Each additional year can increase the premium amount. Buying a policy at a younger age can help one enjoy the cover without spending more.
• Sum assured – The premium amount has a direct correlation to the cover chosen by an individual. The higher the sum assured, the higher the premium.
• Habits – The personal habits of an individual can either increase or decrease the premium. For example, non-smokers are eligible for discounts which is bound to reduce their costs, whereas those who smoke on a regular basis will end up paying more. Similarly, the nature of one’s job can also have an impact on the premium. Individuals in risky fields will be required to pay more compared to those who work regular jobs.
• Plan type – The premium for different plans can vary. An individual who wishes to buy a whole-life policy would end up paying a lot more than he/she might have to pay for a limited term policy. Similarly, if one is purchasing a ULIP he/she might pay a differential amount compared to a pure protection plan.

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:

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.

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.

• High sum assured rebate – Almost all insurance companies provide a rebate for high sum assured. The higher the sum assured the higher the rebate. This rebate is offered primarily due to the reason that an increase in the sum assured results in reduced servicing costs associated with each unit of this amount, helping the insurer earn more profit.
• Online payment rebate – Paying the premium online reduces the physical paperwork, helping a company save money. Certain insurers provide incentives for online payment, saving effort when it comes to physical collection of cash.
• Rebates on premium payment frequency – Individuals who choose to consolidate their premium payments are likely to receive a rebate on the sum they pay. This is on account of reduced costs associated with processing the premium. For example, the insurance company will have limited processing costs for an individual who pays the policy annually when compared to someone who pays the premium each month. One can also choose to pay a single premium and get a higher rebate.
• Pay premium on time – Delaying a premium payment can result in the policy getting lapsed. Reinstating/renewing such policies comes at a cost, for insurance companies charge an interest on the premium amount. Paying the premium on time can help one avoid this additional expense.

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.

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:

• Pradhan Mantri Jeevan Bima Yojana
• Pradhan Mantri Jan Dhan Yojana
• Pradhan Mantri Vaya Vandana Yojana
• Insurance schemes notified by state governments/central government
• Aam Aadmi Bima Yojana
• Janashree Bima Yojana

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:

• Suicide: This is one of the major exclusions outlined by a life insurer. If the policyholder commits suicide within one year of commencement of the policy, most life insurers in the market do not provide any compensation to the family. In this case, the dependents of policyholders may claim up to 80% of the premium amount paid.
• Extreme activities: Most life insurers in the market forbid deliberate participation in various extreme activities. This may include adventure sports such as rock climbing, vehicle racing, paragliding, skydiving, combat sports, etc. If the policyholder suffers death due to any of these reasons, the family of the policyholder may not receive any compensation from the company.
• Man-made disasters: While coverage is offered for deaths arising out of natural calamities, there will be no compensation for deaths resulting from man-made disasters. This may include war, riot, etc.
• Criminal activities: If the policyholder suffers death due to participation in any criminal activities, there will not be any compensation to the family of the insured person. For instance, if the policyholder drives under the influence of alcohol and dies in a car accident, the company has no legal liability to provide compensation. Similar to this, death due to participation in any unlawful activity is grounds for non-payment.
• Lifestyle related diseases: If the death of the policyholder arises out of any lifestyle related habits such as smoking and drinking, there will not be any compensation to his/her family. This is one of the main reasons why the policyholder must disclose his/her lifestyle related habits while subscribing to a policy. If an additional premium is paid for this habit, the policyholder’s family is eligible for settlement.
• Drug abuse/overdose: This is another reason for which there will not be any settlement. Death arising as a result of drug abuse or overdose is not eligible to receive a settlement from the company.
• Aviation-related loss: Death arising as a result of private airline crash is not covered by most insurers in the market. However, if the commercial airline following a specific schedule suffers a crash, the insured person travelling in it is covered by the insurance company.
• HIV or sexually transmitted diseases: Death due to general physical ailments are covered by life insurance companies. However, if the death arises as a result of sexually transmitted diseases or HIV, there will not be any coverage offered by the insurer.
• Maternity-related loss: Most companies in the market do not provide any compensation for losses arising out of maternity or childbirth. You must check with your insurer whether death due to pregnancy-related complications is covered by the policy.

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).

How does it work?

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:

• Investment component: A part of the premium you pay for the policy will be kept for cash value investments similar to what is done under mutual fund accounts. These investments will generate returns depending upon their existing fund value. However, there are no guaranteed returns here. The cash value component of the policy may also decrease depending upon the performance of various funds.
• Death benefit: The life insurance component of the policy works similar to any other traditional plan in the market. In the case of the death of the policyholder, the sum assured amount payable on death will be paid to the policyholder’s dependents. Here, the death benefit will also include the accumulated cash value along with additional bonuses.

Structure of variable life insurance

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.

Benefits of variable life insurance

Some of the key benefits of variable life insurance policies are listed as follows:

• Similar to a whole life insurance policy, a variable life insurance will provide coverage throughout your life. As long as you pay the premiums regularly without fail, the policy will stay in effect.
• Unlike whole life insurance covers, the cash value investments of variable life insurance work similar to mutual funds. Whole life policies keep the cash value in savings accounts, and they provide only a fixed growth rate. The growth rate can be much higher in variable life insurance since the investments are made in various funds.
• Variable life insurance covers allow cash withdrawal benefit under various circumstances. This flexibility allows customers to take care of their specific liquidity needs during the course of the policy term.

Why variable insurance is not popular in India?

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:

• Similar to ULIPs, variable life insurance products have a cost cap on their investments. Hence, you may not be able to increase your investments even if your products are doing well in the market.
• Insurers are bound to declare a minimum floor rate of return to their customers. Moreover, insurers must also declare additional returns in advance for all non-par products offered by the company.
• Since the cash value of the product works similar to mutual funds, there is a high maintenance cost associated with these funds. The sub-accounts are costly to maintain, and these additional charges are likely to affect customers.
• Insurance companies have to maintain notional accounts for all the investments made by their customers. These accounts track various things like premiums, costs, and investments. It could be cumbersome for insurance companies to maintain these accounts.

New proposal by IRDAI

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.

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.

Reasons why senior citizens need life insurance

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:

• Loans and debts: There are many cases of people having outstanding debts even at the time of their retirement. If they wish to prevent their families from this burden, they may need a life insurance plan as protection.
• Dependents: Even at an older age, people may still have dependents in the form of spouse, children, or grandchildren. In this case, it is a good idea to carry on with the life insurance coverage.
• Medical expenses: In their old age, most people are prone to different kinds of health ailments. If they don’t have a comprehensive health insurance plan, they may end up spending money from their savings. A life insurance plan with good maturity proceeds may come in handy in such a situation.
• Living expenses: Even after retirement, people need a regular income source to maintain their lifestyle. The regular payouts from annuity plans can be used to take care of one’s living expenses. With a proper life insurance cover, people can receive maturity benefits and take care of their day-to-day living expenses.

Types of life insurance plans available for senior citizens

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.

• Pensions plans: If you feel that your retirement corpus may not be sufficient for your requirements, you may invest in pension plans to get regular payouts from your policies. There are different variants of pension plans available in the market and policyholders are free to choose the frequency of receiving payment.
• Whole life insurance: This is something that provides coverage for a person throughout his/her life (maximum age of 100 years). Since there is no specific period for coverage, policyholders can meet the minimum requirement of premium payment and get coverage till the specified sum assured amount. Following the death of the policyholder, the maturity amount along with the bonuses will be paid to the family of the insured person. This is an effective plan if you wish to leave behind a specific corpus for your dependent family members.
• Term insurance: It is best to purchase term insurance plans at a young age. However, senior citizens may also take term plans for any of the above-mentioned reasons. Most of the term insurance plans in the market have a maximum entry age of 65 years. If you get this cover at your old age, the policy term may be limited to a maximum of 10 years. Also, the premium for term insurance tends to be extremely high as your age increases.

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.

Why is life insurance essential for women?

The following reasons paint a clear picture of why life insurance is essential for women in the country:

• Financial security of family: There are also many cases of women being the primary earners of their families. In these cases, the loss of the primary earner will have adverse consequences on the finances of the family. To ensure the financial security of the family, women must have a life insurance cover that meets their specific requirements.
• Dependent family members: Women have dependents in the form of spouse, children, and parents. If they want to ensure the financial security of these dependents, they must subscribe to a life insurance plan that offers comprehensive coverage. Women can also plan a corpus for the higher education or marriage of their children.
• Retirement saving: Working women have to plan their retirement and their finances accordingly. Life insurance is one of the top investment opportunities available for them. Women can invest in pension plans to get regular payouts even after their retirement.
• Protection against critical illness: The cost of managing critical illness is extremely high in India considering the skyrocketing medical expenses. A critical illness cover can be taken by women along with a life insurance plan. Some insurers in the market also offer critical illness policies specifically designed for women.

Life insurance policies available for women

Some of the top women-specific life insurance covers offered by insurers in India can be listed as follows:

• LIC’s e-term plan: LIC’s e-term plan is available for both men and women in the country. Working women can also subscribe to this policy and get coverage. This plan is ideal for women who have dependents to take care even when they are no longer around. Unlike most other LIC policies, this policy can be bought online easily.
• HDFC Life Smart Woman Plan: As the name implies, this is a plan designed exclusively for women in India. This policy is similar to any other unit-linked plan in terms of the investment potential. It comes with flexible options for women based on the variants they choose. One of the highlights of this policy is that it waives premiums for three years in case of life-altering events such as childbirth, malignant cancer, or death of the spouse.
• SBI Life - Smart Women Advantage: This is a policy that aims to provide a combination of life insurance coverage, savings, and critical illness coverage under a single plan. This policy also comes with in-built premium waiver during life-altering events. This policy comes in two different options - gold and platinum - based on the level of coverage chosen.
• LIC Jeevan Bharti: Specifically designed for women in the country, this LIC plan offers women with a minimum sum assured of Rs.50,000 and a maximum payout of Rs.25 lakh. The LIC Jeevan Bharti Plan gives policyholders the privilege of the survival benefit, flexible premium modes, auto cover in the case of lapsed policies, and the benefit of converting the maturity amount into annuities.

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.

Difference in premium

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.

Why is it a bad idea to hide your smoking habit?

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.

How life insurers define smokers?

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.

General guidelines on life insurance for smokers

Some of the general guidelines on life insurance for smokers are listed as follows:

• Anyone over the age of 18 years can avail life insurance coverage.
• Life insurance for smokers can be availed till the maximum age of 75 years.
• The sum assured amount may vary from Rs.3 lakh to Rs.50 lakh.
• Policy term for smokers may vary from 5 years to 30 years depending upon one’s requirements.
• Premium for these policies must be paid every year.
• Only those residing in India can take life insurance coverage.

Medical examination

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.

Why business people should have life insurance

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.

• Providing for dependents: Both small and large business owners have to provide for their dependents and secure their future. Life insurance provides the best opportunity to do that. Business owners can purchase any kind of life insurance based on their affordability and ensure the financial security of their dependents.
• Emergency savings: Life insurance comes in many forms. Endowment plans are savings oriented plans that can provide returns upon maturity. By investing a small amount of their monthly income, business owners can build a large corpus for their emergency savings. This can also help them achieve specific goals with regard to their expenses. There are also money-back life insurance plans that provide periodic returns before the end of the actual maturity date.
• Covering liabilities: Business owners typically have a lot of liabilities with regard to their businesses. In the case of their unfortunate death, the burden of responsibility falls on the shoulders of their family members. If they wish to avoid this situation, they must subscribe to a term plan that provides a huge compensation against the death of the insured. There are also loan protector riders offered by some life insurers in the market. These riders come in handy if anything untoward happens to the insured person.
• Planning for retirement: Most earning professionals think about their retirement only at the later stages of their lives. However, it is a good practice to start this investment during one’s mid-thirties. Most of the top life insurers in the country offer retirement as well as pension plans for their customers. Business owners can plan for their retirement by investing in one of these plans. In the case of the death of the policyholder before the retirement age, the sum assured mentioned in the policy document will be provided to his/her dependents. This will be a great investment plan for business owners to take care of their post-retirement needs.
• Financial discipline: Business owners often have the issue of unsteady income flow. Unlike salaried professionals, their income is not fixed every month. If they wish to practice financial discipline, they must invest in a life insurance plan that offers security. By investing in a flexible life cover, business owners can protect their interests and secure the future financial requirements of their families.
• Tax relief: Tax is one of the major things that most business owners worry about. Life insurance policies provide them with one of the best possible ways to get tax relief. By investing their earnings in a life insurance scheme, business owners can get tax relief from the government. Also, it is important to note that all the proceeds from a life cover are exempt from income tax. By investing in endowment plans or ULIPs, business owners can get easy tax relief for their hard-earned money.

How business owners can purchase a life cover

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:

• Identity proof (PAN, Passport, Aadhar, Driving License, Voter ID, etc.)
• Address proof (Ration Card, Passport, Aadhar, Driving License, etc.)
• Age proof
• Business address proof
• Income tax returns (for about three years)
• Bank statements (for about three to six months)
• Audit reports
• Partnership agreement (if applicable)
• Loan repayment proofs (if applicable)

These documents must be submitted along with the application form. The company will verify these documents before providing coverage to the individual.

Conclusion

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.

Types of Life Insurance Products an Entrepreneur Should Consider Purchasing

• Life Insurance for Self: All entrepreneurs should ensure that they have a life insurance policy at all times. You can opt for a term insurance policy, unit-linked insurance plan, endowment policy, money-back policy, whole life policy, or annuity policy, based on what your financial goals and coverage needs are. Regardless of the type of life insurance policy that you purchase, it is vital to opt for a sufficient sum assured that will help your dependents tide over any financial hassles that might arise.
• Keyman Insurance: If you are a business owner, you should also consider purchasing keyman insurance policies for all individuals who hold key positions in the company such as the CEO, project manager, stakeholders, etc. The untimely passing away of a key employee/stakeholder can cause significant losses to the company. Thus, it is necessary for a business owner to purchase a keyman insurance policy for employees holding important positions in the company.
• Group Life Insurance: A group life insurance policy offers similar life insurance benefits to all enrolled members under a master life insurance policy. In this case, the employer/business owner will be the master policyholder and the life cover is provided to all the enrolled members. Under a group life insurance policy, if an enrolled member happens to pass away during the policy term, a death benefit payout will be provided to the concerned employee’s nominee. Providing a group life insurance cover to your employees is a smart way to retain your employees and attract new talent into the company.

Why Should Entrepreneurs Purchase Life Insurance?

• Fluctuating Income: One of the primary risks of entrepreneurship is unstable income. An entrepreneur who is just setting up his/her business, in most cases, cannot expect to get a fixed amount of money on a monthly basis, unlike a salaried employee. This can cause the individual to dip into his/her savings to pay for business needs and one’s own personal expenses. Thus, it becomes all the more necessary for entrepreneurs to purchase a life insurance policy since it will ensure that one’s dependents can lead a financially secure life even if something unfortunate were to happen to them.
• Loans: It is not uncommon for entrepreneurs to take loans to set up their business or expand their business. In such a case, if the business owner passes away, the life insurance company will provide a payout to the nominee. This payout, in turn, can be used by the nominee to pay off any outstanding loans and dues.
• Cover Against Financial Strains Caused Due to Loss of a Key Employee: Key members of the organisation such as the director of the company, CEO, stakeholders, etc., can bring value to the business. The loss of such an individual can have a financial impact on the business. For this reason, it is a must to purchase keyman insurance policies for certain employees in your organisation who hold important positions. Thus, if an individual who is covered under a keyman insurance policy passes away, the insurance company will pay the sum assured to the company. This sum of money will protect the business from the effects of any resulting losses and will also help the business owner hire a new senior executive.

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.

IRDAI’s rules about life insurance for NRIs

Some of the general guidelines about issuing life insurance for NRIs are listed as follows:

• At the time of issuance, a person must be a citizen of India. If a person has relinquished Indian citizenship, he/she is not eligible for coverage by Indian life insurance companies.
• He/she can either be residing in India or living in a foreign country. If the person is living abroad, he/she must have a valid Indian passport.
• If an applicant is planning to move abroad in the near future, it must be disclosed to the company at the time of application.
• Once a life insurance policy is issued, it is valid across the world. So, if the insured dies unexpectedly while on a foreign trip, the family is still eligible to receive compensation from the company.
• Indian citizens already living in foreign countries may also apply for life insurance from LIC and other India-based life insurance companies.
• NRIs must satisfy certain specific conditions set for them before receiving coverage. For instance, the minimum sum assured requirement for NRIs is Rs.2 lakh under LIC. A maximum sum insured limit may also be set for NRIs.
• If a policyholder is planning on giving up Indian citizenship altogether, the insurer must be notified.
• The premium for NRIs remains the same as that of resident Indian citizens unless there are additional risks involved with regard to the country of relocation.

Payment of premiums

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.

Term plans and maturity plans available for NRIs

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.

NRI Centre

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:

• Rider premium – This is the amount a policyholder is expected to pay to avail a rider. This sum varies based on the rider chosen, and is closely linked to the premium for the main policy.
• Administration fee – Almost all insurers levy an administration fee for providing the policy. This could be a certain percentage of the premium amount a policyholder pays. Alternately, a few insurers have a fixed fee for their services.
• Premium allocation fee – Associated with ULIPs, this charge is levied before the insurer invests the premium into units. A certain percentage of the premium is deducted for this. The units allotted are adjusted accordingly.
• Fund management charge – This amount is charged by the insurer for managing the fund of a policyholder. This is computed on the basis of the assets under management and can range between 1 and 1.5% of the investment.
• Fund switching fee – Policyholders have to option to switch between funds when they choose a ULIP. Insurers accommodate this transfer but charge a fee for the same. This amount differs for different insurers and can range between Rs.100 to Rs.500.
• Mortality charge – This is an amount charged for offering death benefits to the insured.

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:

• Time since lapse: Insurance companies usually specify the number of years within which you can revive your lapsed policy. Thus, make sure to check your policy brochure or contact your insurer’s customer service team to find out if your lapsed policy can still be revived. In general, insurers give a two-year period to policyholders to revive their policy. This revival period may vary based on the plan and the insurer.
• Payment of due premiums with interest: If your policy can be revived, you will have to pay all unpaid premiums, from the date of the first unpaid premium, with the applicable interest to the insurer. Thus, at this stage, you will have to visit the policy-servicing branch or contact the insurer’s customer service team for the revival quote. Certain insurers will also levy a penalty charge, which you will have to pay at the time of reviving your policy.
• Submitting a certificate of good health: If you have been uninsured for a certain period of time, your insurer might require you to submit a certificate of good health or might even want you to undergo a medical screening. Post this, you can submit this medical report to your insurer.

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.

Grounds for rejection

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:

• Misrepresentation of age: The cost of life insurance gets higher as people age. Any fraudulent attempt to get lower premiums through misrepresentation of age is grounds for legal action. If the documents are forged while signing up for the policy, it will add to the criminal offense of the policyholder.
• Misrepresentation of smoking/drinking habit: Since the premiums are significantly cheaper for people who don’t smoke or drink, people might sometimes be tempted to hide these habits from the insurer. However, this is another case of fraud that is liable for legal action. If the claim from a non-smoker is related to a disease caused by smoking or if the insurance investigator later finds out about this deliberate misrepresentation, the claim is liable for rejection by the company.
• Pre-existing conditions: If the applicant suffers from any major pre-existing condition, it must be disclosed to the company at the time of subscribing to a life insurance cover. Sometimes policyholders might hide their health issues from the insurer since there are no pre-insurance medical examinations till a certain age. If the company finds out about this during the contestability period, the policy will be cancelled.
• Hazardous job profile: For an insurer, the level of risk increases based on the hazardous nature of the policyholder’s job. Hence, many life and health insurance companies consider this as a factor while determining the premium for an individual. Any misrepresentation about the job profile may also constitute a fraud. While investing a policy during this contestability period, the insurer will also look for claims originating from the hazardous nature of the policyholder’s job.
• Drug abuse: Every insurer expects policyholders to be free of any instances of drug abuse. If an applicant happens to be a former drug abuser, it must be disclosed to the company at the time of signing up. In this case, the insurer might ask for additional medical check-ups to determine the health condition of the applicant. If this is not disclosed, the insurer has the right to contest the validity of the policy or claim.

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.

Death claims during the contestability period

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.

How it differs from the suicide clause

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.

Ways to avoid claim rejection

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:

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:

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:

• Cheap price: Since there are no intermediaries involved in buying online life insurance, the cost of these plans is much lower than offline plans. A percentage of the premiums you pay will be paid to agents or brokers as commissions. In online plans, the amount saved in this way is typically passed on to customers. Hence, it is possible to save a significant amount when you opt for online plans.
• Easy comparison: When you buy online, you can compare the features and benefits of various plans in the market before making an informed decision. There are hundreds of insurance policies available in the market, and it may not be possible to gather information about these plans while enquiring with an agent. Online plans allow people to compare policies easily and pick the right one based on their specific requirements.
• Choosing the right policy: Most people compare plans based on the premium they can afford. Since you are making informed decisions on your own, there is no chance of getting manipulated by an agent or broker. Though it could take some time to choose the ideal plan, you can rest assured that you are choosing a plan that meets all your expectations.
• Easy access: Online life insurance plans can be accessed easily by anyone at their own convenience. The policy can be bought anytime after a simple online research. Also, you can avoid the hassles of visiting a company branch and enquiring with an official or agent before buying a life insurance policy.
• Other factors: When you do your research for choosing a life insurance cover, you also need to consider other factors like the company’s claim settlement ratio, customer feedback, etc. When you research online, you can find this information along with information about various insurance covers. Even if you need feedback about specific online plans, you can access them with your online research.

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.

1. How do I choose the best life insurance plan?

   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.

2. Why do term insurance plans offer higher life coverage compared to other types of life insurance plans?

   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.

3. Is it safe to buy a life insurance plan online?

   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.

4. When does my cover begin?

   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 .

5. Are there any tax benefits offered on life insurance plans?

   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.

6. How do I choose the tenure and sum assured for my 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.

7. What are premiums?

   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.

8. Can I pay the premium for my policy in instalments or am I expected to pay a single 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.

9. What is a ‘bonus’ in life insurance?

   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.

10. How do I know if my insurance plan is eligible for a bonus?

    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.

11. What are the different kinds of bonuses provided by life insurance companies?

    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.

12. What is the difference between terminal, interim, and reversionary bonus?

    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.

13. What are the differences between a participating and nonparticipating policy?

    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.

14. How do insurance companies compute the bonus amount?

    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.

15. What are riders and how can I buy them?

    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.

16. My policy mentions a free-look period. What exactly does this mean?

    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.

17. What happens if I cancel my policy during the free-look period?

    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.

18. What happens if the premiums are not paid during the grace period?

    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.

19. What is the surrender value of a life insurance plan?

    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.

20. How do insurance companies calculate the surrender value of an insurance plan?

    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

    =Rs.30,000

    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.

21. My policy states something called assignment. What exactly does this mean?

    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.

22. What are the important points I should consider before buying a life insurance plan?

    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.

23. I have been asked to undergo a medical test before I can purchase the policy. What medical reports should I submit to avail a life insurance plan?

    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.

24. Can I avail a loan through my life insurance plan?

    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.

25. How can I determine if the agent who is selling the life insurance plan to me is authorised?

    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.

26. My insurance agent has asked me to pay the premium amount directly to him. Is it safe to do so?

    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.

27. Is it better to buy a life insurance plan through an agent or should I buy it online?

    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.

28. How does an insurance company ascertain individual risks before they sell a policy?

    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.

29. How often will I have to pay the premium amount?

    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.

30. Can I make changes to my insurance plan?

    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.

31. What is meant by premium redirection?

    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.

32. What is a graded premium life insurance plan?

    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.

33. Do life insurance plans cover only natural death or do they also cover death by accidents/illnesses?

    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.

34. How important are proposals and all the disclosures that are made in them?

    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.

35. What are the formalities involved when submitting a maturity claim?

    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.

36. What are settlement options?

    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.

37. How do I get the tax policy statement?

    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).

38. Why does the premium increase with age?

    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.

39. What are the documents my nominee should furnish in case of my death during the policy term?

    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)

    Discharge form

    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.

40. Can I find a policy that pays me money during the policy term?

    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.

41. Is it better to buy a life insurance plan at a young age?

    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.

42. Can I get a life insurance plan through my company?

    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.

43. Can I buy an insurance plan for my parents?

    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.

44. Is it possible for senior citizens to buy life insurance?

    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.

45. Will my family have to pay tax on any life insurance payout?

    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.

46. How long does it take for a policy to build cash value?

    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.

47. Who is the claimant with regards to a life insurance plan?

    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.

48. What is modified death benefit?

    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.

49. Will the insurer pay the beneficiaries if the insured dies in an accident which was caused due to him/her being intoxicated/drunk?

    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.

50. Can life insurance payments be released to beneficiaries without going to probate?

    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).

51. What is a premium quote? Is it necessary to request for a quote before investing in an insurance plan?

    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.

52. Are there life insurance plan options available for children?

    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.

53. Should I invest in a Pension/Retirement Plan or a ULIP at the age of 40 years?

    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.

54. Are premiums fixed by the IRDAI or do they vary from insurer to insurer?

    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).

55. Will I receive any discount if I purchase my insurance plan online?

    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.

56. On what basis is the premium amount calculated?

    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.

57. What does a life insurance policy not cover?

    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.

58. Can I increase my sum assured?

    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.

59. What is the duration of the grace period and can it be extended?

    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.

60. Will my term insurance plan cover death that occurs abroad?

    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.

61. What is the claim settlement ratio?

    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.

62. I am an NRI. Can I purchase a life insurance policy from an Indian insurance provider?

    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.

63. I have recently lost my original policy document. What should I do?

    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.

64. In case my nominee passes away before me, who will receive the death benefit?

    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.

65. Will I get a full premium refund if I cancel my policy before making any claims?

    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.

66. What is meant by the Grievance Solved Ratio?

    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.

67. Do term plans have an investment component?

    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.

68. What is a Term Insurance Rider?

    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.

69. Which are some of the lesser known riders available with a life insurance policy?

    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.

70. How can I calculate the premium for my life insurance plan?

    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.

71. What are some of the components included in the cost of life insurance premiums?

    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.

72. Are there any ways I can save on my life insurance premiums?

    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.

73. Why is it necessary to check the solvency ratio of an insurance company?

    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.

74. How do I decide how much life cover to purchase?

    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:

    • Current income and liabilities
    • Your current age
    • Inflation
    • Needs of your dependents
    • Financial goals for the future
    • Savings, investments, returns from various avenues
75. I am a 50-year old individual with a good number of liabilities. Should I opt for a term insurance policy?

    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.

76. Will I receive a discount if I pay my premium online?

    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.

77. What is meant by ‘traditional life insurance plans’?

    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.

78. What is the premium payment term (PPT)?

    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.

79. In case the nominee is a minor at the time of the policyholder’s death, whom will the claim amount be paid to?

    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.

80. What should one do in case he/she is dissatisfied with the claims decision communicated by the insurer?

    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.

81. Can an individual with a pre-existing disease purchase a life insurance plan?

    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.

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: Cancer: Cancer is considered to be one of the deadliest diseases and due to the high mortality rate among patients suffering from cancer, most of the insurance companies are not willing to provide coverage. In case your family has a history of suffering from cancer, it is recommended that you purchase a critical illness or a cancer-specific cover. Even if you are a survivor, the chances are still high that the insurance company may not be willing to provide you with a life insurance cover. Hence, it is advisable to purchase a life insurance policy when you are young. HIV/AIDS: It is another deadly disease for which there is no cure yet. Hence, a majority of insurance companies in India do not provide cover to those who suffer from this disease. Despite the advancement in medical technology which has resulted in the patients seeing an increase in their life expectancy, they do not qualify to receive life insurance coverage. Other conditions: It is difficult for you to get a life insurance cover if you suffer from conditions like stroke, liver failure, kidney failure, etc. Here also the risk of you meeting with death is extremely high and hence the chances of you getting a life insurance cover is extremely low. 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: Diabetes: You will automatically fall into the high-risk category if you are a diabetic. A person suffering from this condition are categorised under the type 1 and the type 2 category. The chances are high that if you suffer from diabetes, you are likely to suffer from other conditions such as blood pressure, obesity, health conditions, etc. which will ultimately put an impact on the premiums you will pay. A person suffering from diabetes will have to pay higher premiums. Heart disease: This is a very common disease among middle-aged and older people in India. The premium is decided on how severe the heart condition is. If you have survived a heart attack or undergone a bypass surgery, the chances are very low that you will be provided a life insurance coverage. High blood pressure: The chances of you suffering from this type of condition may increase as you advance in age. Thus, when you are purchasing a life insurance scheme, you may have to undergo tests for blood pressure. Though this condition is not life-threatening in any manner, the premium you will have to pay will get impacted significantly if you suffer from this condition. Obesity: Though this is not a health condition in general, if you are obese, the chances of you suffering from health conditions such as health ailment, blood pressure, kidney ailment, etc are extremely high. You will be able to get a life insurance coverage even if you are obese, but if your BMI is over a certain limit, the insurance company will ask you to undergo various medical tests in order to look for various health-related conditions. High cholesterol: This is one of the most common health condition among the people today. It is a risky health condition as it may lead to you suffering from health ailments, high blood pressure, diabetes, kidney failure, etc. You will have to pay higher premiums if your cholesterol is over a certain limit. Kidney ailment: It is considered to be a risky condition by the life insurance companies in India. You will have to pay higher premiums if you suffer from any form of kidney ailment despite the severity of the condition being low in nature. 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. Read More...

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 DHFL Pramerica Prahri: This insurance policy is designed for a military personnel and the members of the Armed Forces in India. This policy provides coverage for war and warlike situation. This policy offers cover to a military personnel and his family members and ensures that they do not undergo any financial problems in case something happens to the insured. HDFC Life Shaurya: This policy is designed for those who belong to the military as well as for the ex-servicemen in India. The HDFC staff which works to provide cover to the military personnel are well versed with their lifestyle and how they function. This policy offers not only cover to the personnel and his family members but also helps them take care of their financial requirements as well. Apart from providing insurance cover to a personnel belonging to the Indian Army, the policy also provides cover to those who are officers at Indian Air Force, Navy, Border Security Force, Paramilitary Organisation, Fire Services, employees of schools run by Armed Forces, etc. Aviva Suraksha: This is an umbrella product which has different policies designed to benefit the members of the Armed Forces in India. This policy not only provides a protective cover but also provides cover for retirement, investment, child protection needs, etc. of a military personnel. The cover ensures that in case something happens to the military personnel, the family’s future is safe and secure and financially covered. The claim settlement process and other requirements are extremely simple in nature and ensure that the family of the bereaved is adequately covered. 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. Read More...

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: Life insurance for pilots: The job of being a pilot was considered to be of extremely high-risk. Though it is safer as compared to earlier times, it is still considered to be a high-risk profession. Pilots can avail group insurance policies and can also avail it benefits after retirement. The premium that a pilot will way have to pay is considerably higher as compared to the premium you will pay for a normal life insurance policy. Life insurance for athletes: The premium an athlete will have to pay is higher as compared to the premiums you will pay for a life insurance policy. The reason is that the chances of an athlete suffering from a major injury or concussion that can be life-threatening in nature are extremely high. Most of the adventure sports are considered to be extremely risky in nature and hence having life insurance is of utmost importance. Life insurance for firefighters: It is extremely tough for a firefighter to have a life insurance policy since the chances of them losing their lives or getting critically injured are extremely high in nature. Since firefighters are employed mostly by the Government it is their responsibility to provide life insurance to those who are firemen. LIC currently has the provision of providing life insurance to these individuals. Life insurance for military and police professionals: Professionals who are related to police, and military have to pay higher premiums since they run the risk of meeting with death or getting critically injured due to their propensity to terrorists and criminals. Currently, these types of professionals are provided life insurance through Army Group Insurance Fund (AGIF). Various private insurance companies have introduced life insurance policies for the professionals who are police or military professionals. However, the professionals who avail private life insurance policies have to pay their premiums at higher rates as compared to other normal life insurance policies. Life insurance for medical professionals: There are life insurance policies for those associated with the medical field as they run the risk of being hit by a serious disease or health condition. Various insurance companies have introduced specific life insurance policies for medical professionals. However, the premium that these individuals will have to pay is higher as compared to a normal life insurance policy due to the risk associated with this field. Life insurance for construction workers: Unfortunately, various insurance companies exclude construction and mining workers from the list of professionals they will provide coverage to. The reason being that these individuals work in extremely hazardous conditions and have high risks of losing their lives or getting seriously injured. Individuals who are construction or mining workers have to rely on state-based insurance scheme designed specifically for labourers in order to enjoy the benefits of having an insurance scheme. These individuals will have to pay higher premiums if they purchase a private health insurance policy due to the risk associated with the job. 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. Read More...

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. Read More...

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: Height measurement Weight measurement Blood sample Urine sample Saliva sample ECG Answer a questionnaire regarding one’s health 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. Read More...

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.

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: Death Claim: A death claim will have to be raised by the nominee upon the policyholder’s death. Firstly, as a nominee, you will need to intimate the insurer in writing about the upcoming claim. Post this, you will need to submit the actual claim form with relevant supporting documents to the insurer. The insurer is required to pay the sum assured within a period of 30 days. In case any further investigation is required, the insurer will have to complete this and settle the claim within 6 months.   Maturity Claim: If the policyholder survives until completion of the policy tenure, a maturity claim can be filed. In this case, the insurer will send the policyholder a policy discharge form. The policyholder will have to fill this form and submit it to the insurer with all required documents. The insurer will verify the claim and pay the maturity sum assured. Rider Claim: The settlement for a rider claim will vary as per the terms and conditions of the rider. For example, for a critical illness rider, the benefit will be paid at diagnosis of the disease. Whereas, for certain other types of riders, the payout will be offered along with the death benefit. 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: Do I have the right type of life insurance product? 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. Is the sum assured sufficient for my family? 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. Are the payouts offered by the plan still in-line with my financial needs and goals? 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. Am I being charged a fair premium for the policy? 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. These life covers usually come with a waiting period between 60 days and 90 days, during which time claims will be rejected. Death due to pre-existing illnesses is not covered in most cases. The amount of life cover that is offered will usually be a multiple of the SIP amount and will vary based on one’s investment tenure. Asset management companies that provide such schemes are likely to have an eligibility criteria for these life insurance covers.

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. Read More...