This insurance is basically a financial cover provided to the family in case of a policyholder’s death. For life or any other insurance policy, one must understand one thing that the best life insurance policy will provide the cover of at least 10 times that person’s annual income. One point that a person also must remember that the benefits will not be provided to him/her, the beneficiaries will be the family members.
The amount that the family will get in case of the policyholder’s death will help them to sustain for some time until a stable source is created. The person who is availing the policy will also be given tax exemptions stated under section 80C of the Income Tax Act. Life insurance can also be taken as a method of saving that is also providing a cover for much extra amount that the actual total of the savings.
The life insurance plans provide an array of benefits that will help the policyholder to keep the stress away from the policyholder.
How Life Insurance Is An Important Part?
The majority of us understand the importance very well but when it comes to actually get one, many choose to ignore the truth of what will happen to the family in case the sole bread-earner gets untimely death.
The sorrow of losing the most important part that was helpful in their sustainability is enough and the family should not be forced to also face economic crisis as well. Some very crucial parts related to the importance of having a life insurance policy are:
Life insurance becomes extremely important if a person is married and has children. Generally what happens is the policyholder is the sole source of income and if s/he’s gone and hasn’t provided any protection plan, the family would suffer and will suffer from a lot. Having a firm financial base is extremely important to sustain in today’s world.
If luckily nothing happens to the policyholder, life insurance is also a very good option to save some huge amount of money in a very smart way. After maturity, the policyholder can ensure his/her life to be good as well after retirement.
There are a lot of people who end up getting loans in the earlier stage of their careers. Loans for cars, houses, etc. are frequently taken by people. In the case of policyholder’s death, it would be a lot of burden on the family and it may also happen that without any protection plan, they will never be able to pay off those debts.
Security at Time Of Illness
At the time of any illness, the person is unable to maintain the same income. This is the time when a life insurance policy plays a huge role in covering up the expenses of the medical requirements.
As the policyholder will be bound to pay a fixed amount as the premium, he/she will save that amount. The best life insurance plan will not always need a higher premium. If a person is getting the policy in the earlier years, i.e., 21-25 years, the premium amount will be extremely low and the cover amount will be huge.
It provides a financial base on which the family of the deceased can sustain for at least some time until a stable source of income is created. It becomes a kind of mandatory for a person to get enrolled in any of the life insurance plans if s/he is the only person that is bringing a stable monthly income.
Rebate in Tax
The rebate that is provided by the government is a surplus reason to get a policy. Under Section 80C of the Income Tax Act, the government provided the rebate to the policyholder in his/her income tax. The redemption is huge. A person can save up to ₹1.5 lakhs if he/she is enrolled in any life insurance.
A life insurance policy not only provides an option of sustainability but also ensures that children are able to get the proper education. When any tragedy strikes like the demise of the person who was the only earning individual, all things tend to set aside and the only question that remains is how to sustain in life.
Benefits of Life Insurance
The figure will surprise everyone that only 10 in 100 people are enrolled under a life insurance policy in such a big country like India. A person has to pay a premium and that’s a big financial concern a person has to undergo.
The insurance can be even more fruitful to the person if he/she is young and want to save some amount along with providing some security. Some compelling benefits of life insurance are:
Care for Your Family
If an individual is not convinced of any of the other benefits or importance, this point may be able to get him/her bend toward getting one. Everyone wants to provide their families with a sustainable and secure future.
Tool To Achieve Long-term Goals
The nature of this investment is long-term. A person saves or invests over time and is bound to get a hefty sum of amount on maturity. In case nothing happens to the policyholder, the amount withdrawn at the time of maturity will help the person to achieve and get those things that he/she always wished for.
Helps Businesses As Well
There is a myth circling around that the life insurance plans are only helpful for families and individuals. There are many life insurance policies that also provide security and sustainability to businesses. If there are more than two partners, they can easily enter into a buy-sell agreement and the nominees of the partner who died will get the payout if they are not willing to take part in the business.
This is what everyone is in dire need in today’s times. When there is a security that is available for the family, a working individual will definitely be at much peace of mind. They will not have to suffer in two losses at once.
When a person is in need of getting something for him/herself and the funds are not sufficient. The only option that remains available is to take a loan. However, loans also require something against the amount that the loan is providing. A person can mortgage any property that his under his/her name.
Benefits in Income Tax
Thanks to section 80C, the individuals who get enrolled in a life insurance policy are liable to get huge rebates in the income tax. The amount that a person paid as premium is getting saved and providing him/her with a financial cover simultaneously.
There are some insurance policies that are also providing health cover benefits as well as providing the assured sum as a life insurance policy. The health insurance sector is also growing at a very rapid pace and the reason some companies are providing this benefit is to cope up with the competition.
Get It As Early As Possible
All the insurance policies are cheaper and very economic if an individual is purchasing them at a younger age. As soon the age goes above 28 or 30, the insurance policies start to get costlier. The policies work on probability.
The uncertainties start to grow as the person goes beyond the age of 40.
Inclusions & Exclusions: Very Crucial Factor
Life insurance policy takes responsibility for an individual’s family’s smooth sustainability. If the policyholder undergoes any unfortunate happening, his/her family can rest assured that there is not going to be any financial crisis as well. The benefits of life insurance plans are enormous and the youth along with the families have started to understand its importance to a very extent now. However, there is yet a percentage who is totally unaware of the importance.
The exclusions that the insurance companies have are almost similar. Some very common ones are:
Cause of Death
The insurance companies will determine the cause of the death if it’s untimely with the help of the court of law. If death is suicide, the cover will not be provided. The courts will be approached if there is any conflict that is witnessed in the medical reports prepared by the experts. The death certificate must be attached when the beneficiaries make the claim for the amount to the insurance company.
Accidental Death Circumstances
The insurance company will also investigate the case if the cause of death is shown as an accidental one. The investigation will be based on checking up the factors of the accident in detail.
If the insurance company found out that the reason behind the sudden illness or death is anyone from the points mentioned below, then the claim will be denied immediately.
- Drunk driving
- Mid-war death
- While participation in any racing activity
- Any criminal activity
- Death during pregnancy or while childbirth
- Due to any pre-existing diseases
The life of smokers or alcoholics is assumed to carry higher risk and therefore, a bit of extra premium is charged on the policies they purchase. If the person hid the fact that s/he is a smoker or an alcoholic and died due to any body part failure cause of these habits, the claim will be denied and all the money will get wasted.
The insurance companies don’t generally hide the exclusions and a person can easily find them in the documentation without much effort. While making a selection, it is highly important that the individual must clarify all the points with the agent or the company.
Who Decides Life Insurance Premium?
Insurance companies mainly decide the actual premium which should be paid by the policyholder. The policyholders simply choose the best life insurance policy for them and the assured sum. However, it should be known that the insurer interprets the assured sum of a particular life insurance terms on the basis of the policyholder’s lifestyle, financial condition, occupation etc.
Types of Life Insurance Policies And Their Benefits
Life insurance is of two types. The first type focuses on life coverage and the other one covers the investment and insurance. So, before choosing the best life insurance plans, one should know about the offered life insurance policies in India.
This type of life insurance for the child of the policyholders. Probably, these plans come with installments which the policyholder has to pay yearly or he has to pay for one time when the child is 18 years old.
Coverage: It covers the child’s wedding, education and so on.
Benefits: The benefits of this plan are –
Tax Benefits: The child can get several tax benefits under various Income Tax sections. The death benefit got by the child is also tax-free.
Secured the upcoming future of the child: The insured’s child can get the benefit on maturity even his/her parent dies. The plan will cover the child’s education and marriage by which it can assure the financial security of a child.
Need not pay the premium when the policyholder dies: The utmost feature of this plan is the inbuilt premium waiver benefit. If the policyholder dies in the meantime of the plan term, the family of the insured person has not to bear the premiums of this plan. The child can get assured pay benefits at the right time.
ULIP or Unit Linked Insurance Plan offers a long-term opportunity to the policyholder. A part of this policy’s premium is utilized to cover the risks of a life insurance plan and the rest amount is used in the market fund.
Coverage: It covers both investment and insurance benefits.
Benefits: The benefits of this plan are –
Transparency: Before purchasing this type of life insurance, the complete structure and the tenure will be shared by which the policyholder can invest his hard-earned money in a right way.
Tax Benefits: The policy buyer can get some tax benefits under section 80C.
Regular Savings: This plan makes a habit of regular savings which used as a corpus in the future.
Term Insurance Plans
This is one of the affordable life insurance which can be bought without any further hassles. The policyholder can get a pre-decided death benefit from this plan.
Coverage: This plan offers a complete risk-coverage. It also covers death benefits.
Benefits: Benefits of term insurance plans are –
Simplicity: One can easily understand and identify the best term insurance plans. There is no complexity and the policyholder has to pay only the premiums on a particular period basis.
Death Benefit: This plan offers death benefits as a lump sum. With the help of this plan, a family easily manages the daily expenses.
Lower premiums: The best part of this term insurance plan is its lower premium especially when the buyer purchases it online. The premium can be lower if the insured person purchases it at his young age.
This plan is also called a Pension Plan. It offers a corpus for the retirement of the buyers. It also provides the death benefits of the policyholder as well as the policy nominee.
Coverage: It covers death benefits and a corpus of the post-retirement.
Benefits: The benefits of these plans are:
Death Benefit: The death benefit offered by this plan is the fund value or it can be 105% of total premiums.
Guaranteed income: One can enjoy his post-retirement life with a steady monthly income from this plan.
Vesting age: Vesting age is the age when the insured person gets the monthly pension. Most plans come with a minimum age of 40-50 as vesting age.
Whole Life Insurance Plans
This is the plan which offers life coverage for the whole life of the policyholder. This is one of the best life insurance policy which is calculated from the time of purchasing and it is paid to the nominee when the policyholder dies.
Coverage: It offers coverage for the whole life of the insured person.
Benefits: The benefits of this life insurance are –
Protection for life: This plan will not expire in value. This plan will secure the whole life of the policyholder.
Death benefits: After the death of the policyholder, his loved ones will be paid the whole sum.
Cash value: A part of the premium can be borrowed which will enrich the cash value.
This is the traditional life insurance policy. This is the perfect combination of savings and life coverage plan. The risk of this endowment policy is lower than other plans.
Coverage: It offers life coverage as well as a savings plan.
Benefits: Benefits of the endowment plan are:
Low risk: This plan has a low risk as the money is not directly invested in the stock market or equity funds.
Higher returns: It offers the family of the insured person financial security. The benefit of both survival and death is higher than any other life insurance plan.
Tax Benefits: The insured one gets some tax exemption under section 10 and 80C.
The payout of this policy is known as survival benefits. These benefits are enumerated as the percentage of the assured sum. If the policyholder dies in the meantime of the running tenure, his/her family will be paid the whole assured sum with the survival benefits which was paid already. This feature makes this the best life insurance plan.
Coverage: This plan covers the whole insurance with a return of a specific period basis.
Benefits: The benefits of this life insurance plans are:
Risk-free returns: One’s hard-earned money should be invested in the right place. There is no risk in this policy and for this reason, one can easily opt. this policy.
Liquidity: In the meantime of the policy duration, a specific part of the money is paid on a periodic basis. Therefore, it offers required liquidity which one can utilize to accomplish his/her life goals.
Survival benefits: This plan offers a percentage of assured sums in a particular period basis as survival benefits. Additionally, it gives maturity benefits with an amount of bonus.
Some Policies to Consider In 2019
A person must look at the insurance policy not only just as a financial cover to the family but also as life insurance is a long term investment that will provide some assured benefits. An individual must choose the plan according to him/her. Otherwise, what happens is the person ends up choosing a plan that’s showing bigger returns but he/she didn’t go through the terms and conditions and when they actually need the plan, they found themselves in awe. It’s totally up to the person to go thoroughly in the terms and find out about anything that isn’t suitable.
Some of the life insurance policies provided by the big players that are available to suit all the requirements are:
|Plan||Min-Max Age||Assured Returns|
|SBI Life eShield||18-65 years||Minimum ₹20 lakhs|
Maximum- No Limit
|Aviva i-Life||18-55 years||Minimum ₹25 lakhs|
Maximum- No Limit
|Jeevan Pragati Plan||12-45 years||Minimum ₹15 lakhs|
Maximum- No Limit
|ICICI Prudential iProtect Smart||18-65 years||Minimum ₹2,400/year|
Maximum- No Limit
|PNB MetLife Mera Term Plan||18-65 years||Minimum ₹10 lakhs|
Maximum- No Limit
SBI Life e-shield
This is a term insurance plan that is offered via an online platform and gives higher returns on minimal premiums. However, the plan doesn’t feature any survival benefits and can be availed by anyone online without any middlemen.
Some features are:
- The policy comes in the maximum term of 10 and a minimum term of 5 years.
- The minimum premium amount is ₹3,500/year.
- The plan comes with no maximum limit.
Aviva i-Life also comes as a term insurance plan that offers the individual’s family full financial protection in case of any unfortunate happening during the policy term. As it’s a protection plan, there is no maturity benefit provided by Aviva. The plan, however, provides the policyholder to give his/her family a security cover on a minimal premium.
Some features are:
- Aviva i-Life has the minimum term of 10 years and the maximum term of the insurance plan is 35 years.
- The payment can be submitted either half-yearly or annually.
- The maximum age to opt for the plan is 55 years.
Jeevan Pragati Plan by LIC
The facility of loan also is provided by the LIC to the policyholders. The policy also comes with the option of the increase in the security cover every 5 years automatically. The policy also works as a tool to save money over time.
Some features are:
- This policy offered by LIC comes in the minimum and maximum terms of 12 and 20 years respectively.
- The maximum maturity age is 65 years under this policy.
- The premium can be paid in various formats, like monthly, quarterly, half-yearly, and annually.
ICICI Prudential iProtect Smart
The plan offers protection to the families in the case of the policyholder’s death. ICICI also provides protection for any permanent disability or any such illnesses along with some extra cover for women.
Some features are:
- The maximum age of the person at the time of maturity of the plan is 75 years.
- The minimum premium is ₹2,400 per year.
- The critical illness provided in this policy by ICICI is a minimum sum of ₹1, 00,000.
PNB MetLife Mera Term Plan
As the name of the policy suggests, it’s a personalized plan that is provided to the customers that ensure their families in case any unfortunate thing happens to them. The benefits of life insurance by PNB is it will provide a regular monthly income to the family until the child of the policyholder turns 21 along with the payment of maturity amount.
Some features are:
- The minimum sum assured under this policy is ₹10, 00,000.
- The policy ranges from the term of 10 years to 40 years.
- The maximum age of the policyholder at the time of maturity should be 75 years and the maximum entry age is 65 years.
How Age Affects Life Insurance Premium?
Life expectancy reduces as a person age. The risk that the insurance companies are willing to take in form of providing insurance goes significantly up. What insurance company does is when an old age person tries to opt for insurance, the company calculates the lump sum that the insured would have paid if the policy was taken at an early age and divides it in the years left to maturity.
Claim Settlement Ratio in India
This ratio tells a lot about the reputation of the company and it states how easily this particular company settles the claim. There is a formula that is used to find out the ratio and that is (Total Number of paid claims/Total received claims)*100.
The average claim settlement ratio in India lies around 90-98%.
Life insurance Riders
The main function of the rides is to add some extra benefits in the life insurance offered by the insurers. They help to increase the coverage of life insurance. One should verify the market before choosing the riders for him. Picking up the best riders is not an easy task. Therefore, he should take some expert’s decisions and research the market deeply before choosing the life insurance riders.
Life Insurance: FAQs
Q.1 What are the things to look before finalizing the purchase?
An individual must check the claim settlement ratio of the company. Along with it, there are many points to check such as,
- Lock-in period
- Details regarding premium
- Default premium
- Loan availability
- If there are any other charges
Q.2 What are the basic things that life insurance will cover?
- Daily Expenses
A life insurance plan will cover the daily expenses of the family. The policy provides a monthly income and that will help meet all the costs.
- Vital Expenses
In case the person took a loan or is under multiple debts, the family will be able to repay the loans with the financial help that the policy will provide.
- Saving a Business
A life insurance policy will also help an individual to save a business. The agreement can be made in which the partner can purchase the stake of the deceased person from the cover amount and hence the business is saved.
- Retirement Planning
If there is nothing unfortunate that happened to the policyholder and maturity date arrived, the policy can be a good source of income to the person live a quality life even after retirement.
Q.3 Is there more than one type of life insurance?
Yes, there are basically two types of life insurance that are there. A person can opt for according to his/her requirements. The types are:
- Term Insurance
These plans will come under the specific time frame. The term of these plans can be anywhere between 5 to 20 years. In case the person dies within the term, the proceedings will be awarded to the beneficiaries that the person.
- Permanent Insurance
These are the insurance options that are available to an individual until s/he decides to pay the premium amount. This type is not very common in the masses.
Q.4 Is the assured amount taxable?
No, the assured amount is not taxable if it’s paid to the same beneficiary that was named by the policyholder. The beneficiaries that will be exempted from the tax are the spouse and children only. If the policyholder has named someone else, e.g., business, the proceedings will be taxable.
Q.5 What is the best time to get life insurance?
Life insurance is more beneficial for families rather than for the policyholder’s self. It will also cost the person more as much he/she delays in getting one. It is recommended that life insurance must be opted for as soon as a person becomes capable to afford it.
However, there are some times that are considered best for getting a policy, such as:
- At the time of marriage
- When a person is buying a new home
- At the time of investing and starting up a business
- At the time of getting loans
Q.6 What if you fail to pay a premium?
Insurance companies offer a grace period of 31 days in case a person missed a payment of the premium. There will be no interest charged if the premium is paid within the grace period. If the person opted for the permanent type insurance plan and failed to pay the premium even in the grace period, the company will start taking premium amounts from the coverage amount. This will be done after taking the policyholder’s consent. If the person is not willing to take this option, the policy will be terminated.
Q.7 Should I go for online life insurance?
Yes, a person can definitely go for the online option. It’s the easiest option and also turns out to be very much cost-effective.
Q.8 What do the insurance companies mean by loan availability?
The loan availability feature provides the person to take a loan against the policy. In the case of non-repayment, the assured sum will be transferred to the bank to repay the loans.
Q.9 What are the general documents that are needed at the time of the claim?
The death certificate is a must document that is needed to be produced at the time of settlement. If it’s an accidental death, post mortem report, police report, etc. could also be sought by the insurer.