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Life Insurance is a contract between the insurance company and the insured that the insurance company will pay a lump sum amount to the beneficiary nominated upon the death of the insured, i.e., the policyholder in exchange to a premium paid. The premium is paid either on a monthly, quarterly, half-yearly, or yearly basis.
Life Insurance Policy is a legal contract. The terms of the contract explain describe the limitations to the insured events. These excluded events limit the liability of the insurer in respect of the claims. Claims relating to suicide, to quote an example, is one of the exclusions. Others are war, riots, and natural calamities.
Insurance policies in modern times have branched out their products to retirement plans, i.e., annuities.
The important Life Insurance terms that you must know are:
The following are the benefits of Life Insurance:
Before deciding on the best Life Insurance plan, you should understand some basic steps that will lead you to make the right decision.
The comparison between Term Life and Whole Life Insurance is given below for you to choose which will suit you better.
|Term Life Insurance||Whole Life Insurance|
If you have decided what you are expecting out of an investment in the Life Insurance policy, you can study the difference and decide on the best policy for you.
The different types of Life Insurance Policy are:
In a Term Insurance, there is risk cover and no maturity benefits. There is a risk cover for a defined period. There is only death benefit and no maturity benefit under this policy. That means, in case of any eventuality, the dependants will get a lump sum amount. But if the policyholder outlives the policy term, then there is no benefit.
If you are seeking only protection for your dependants, then this policy is recommended since it gives high returns for low investment. There is a provision for riders like critical illness, permanent disability due to an accident, hospital cash, etc. which will give a wider cover.
There is an option for the payment of death benefit either in one lump sum or as monthly pay-outs or as a combination of both.
The premium paid towards this plan will be partly used for insurance cover and partly for investment. The investment will be done either in bonds, equities, debts, hybrid funds or market funds. You can opt for the investment as per the level of risk you can accept.
Endowment Plan is a traditional plan. The premium paid is partly used for risk cover and partly invested in the capital market by the Life Insurance Company. Periodical bonus will be paid which will either be paid along with the maturity amount or paid along with the death benefit to the nominee. Both maturity benefit and death benefit are available in the plan.
Though the investment component exists, the risk involved is much lower than in other investment products.
This is a plan wherein a percentage of the sum assured is paid to the policyholder at periodical intervals as a survival benefit. This plan is entitled to the bonuses declared by the Company from time to time and is an ideal plan to meet short-term financial goals.
This is a policy wherein cover is available until the insured is alive and sometimes even up to 100 years. The death benefit is available for this plan. If the insured lives beyond 100 years the maturity amount along with the bonus will be paid to the insured.
There is an option to make partial withdrawals after completion of the premium payment term. The premium is much higher when compared to the term plan.
This plan is beneficial to build a corpus fund for your children for future requirements like education or marriage. There is a provision for payment of annual payments or a lump sum payment on attaining the age of 18 years. If during the policy term the parent expires, then some of the companies will waive further premiums and the policy will be active till the maturity date.
This plan will give you financial strength on retirement. You can be independent financially and live peacefully after retirement. A lump sum amount will be paid on attaining the age of 60 years or can also be by way of annual instalments.
In the event of the death of the insured, the nominee will be paid the death benefit which will be much higher than the coverage value or fund value. It could be 105% more than the total premium paid. If the insured outlives the policy term, then the fund value will be paid which can be used for an annuity.
The following are the top Life Insurance Companies in India:
The maturity benefits of term insurance are not like a traditional Life Insurance plan where the sum assured is paid out along with accrued bonuses is paid on the maturity of the policy to the policyholder.
Term insurance has only a death benefit wherein the sum assured is paid to the nominee on the untimely death of the policyholder. If the policyholder desires maturity benefit, then they have to go for TROP plan, i.e., Term Return of Premium. Under this plan, if the policyholder lives beyond the period of the policy, the premiums paid on the policy will be returned. But even in this plan the maturity benefit, i.e., the sum assured will not be paid to the policyholder. Only the total premium paid during the term of the policy will be paid.
Now you can purchase an insurance policy online which can be done at the comfort of your home or office.
There are two ways of purchasing the policy online. If you have decided the insurance company from whom you intend to purchase the policy from, you can visit the official website of the insurance company and apply for the policy. The other way is to visit the website of any insurance aggregator wherein you will have the advantage of comparing the offers of various insurance companies in respect of factors like premium, additional benefits, claim settlement ratio. You will have the advantage of weighing the pros and cons of each insurance company before coming to a conclusion.
Once the decision is made you should follow some simple steps to apply for the policy online:
The payment of premium for Life Insurance can be made by the following ways:
|Name of the Policy||Min/Max Age||Policy Term||Benefit on Accidental Death||Critical Illness Rider|
|ICICI I Protect||18 to 60 years||5 to 40 years||Applicable||Not applicable|
|LIC E Term Plan||18 to 60 years||10 to 35 years||Not applicable||Not Applicable|
|Max Life Online Term Plan||18 to 60 years||10 to 40 years||Applicable||Not Applicable|
|SBI Smart Shield||18 t0 60 years||5 to 40 years||Applicable||Not Applicable|
|HDFC Life Click 2 Protect 3D Plus||18 to 65 years||10 to 40 years (can be extended up to 50 years)||Applicable||Applicable|
|SBI Life Shield Plan||18 to 65 years||5 to 30 years||Applicable||Not Applicable|
|Aviva Life Plan||18 to 55 years||10 to 35 years||Not Applicable||Not Applicable|
|Aegon Life Term Plan||18 to 60 years||5 to 40 years or till the age of 80||Applicable||Not Applicable|
|PNB Metlife Mera Term Plan||18 to 65 years||5 to 40 years||Applicable||Applicable|
|Bajaj Allianz e Touch||18 to 65 years||5 to 40 years||Applicable||Applicable|
You have to check for details of premiums to be paid, lock- in period, revival policy, premium default implications, charges to be paid, terms of the policy, and guaranteed benefits before purchasing an insurance policy.
The disclosures made in the proposal are crucial since any wrong disclosure could be a reason for declining the claim.
There is an option given by the insurance company to reduce the sum assured in proportion to the premiums paid if the policyholder discontinues payment of the premium after some time. If there are any benefits associated with the sum insured, the same will be reduced in proportion to the revised sum assured. Then this policy will be termed as the reduced paid-up-value policy.
Paid- up value = Nos of premiums paid/Nos of premiums payable x Sum Assured
The beneficiary is the person nominated to receive the benefits of the policy in the event of the death of the policyholder.
If the premium is not paid on the stipulated date a grace period of 15 days will be provided for premiums paid monthly and 30 days for the premiums paid yearly. If the premium is not paid even within the grace period the policy will lapse or will be terminated.
A Free-look period is the time span within which you can return the policy if you are not convinced with the terms and conditions. The period generally will be 15 to 30 days from the date of purchase of the policy. On returning the policy the expenses incurred for medical check-up and the stamp duty will be deducted and the balance premium will be refunded.
Tax benefit can be availed under Section 80C of the Income Tax Act 1961 on the premiums paid for the Life Insurance policy.