Life Insurance

Life Insurance can be defined as a contract between an insurance policy holder and an insurance company, where the insurer promises to pay a sum of money in exchange for a premium, upon the death of an insured person or after a set period. Here, at Life Insurance, you pay premiums for a specific term and in return, we provide you with a Life Cover. This Life Cover secures your loved ones’ future by paying a lump sum amount in case of an unfortunate event. In some policies, you are paid an amount called Maturity Benefit at the end of the policy term.

There are two basic types of Life Insurance plans

1. Pure Protection: A Pure Protection plan is designed to secure your family’s future by providing a lump sum amount, in your absence.

2. Protection and Savings: A Protection and Savings plan is a financial tool that helps you plan for your long-term goals like purchasing a home, funding your children’s education, and more, while offering the benefits of a Life Cover.

Let us understand some commonly used terms in Life Insurance:

Life Assured: It is the person who is covered under the insurance policy

Proposer: It is the person who pays the premiums of the policy. For example: If you have bought the policy for yourself, then you are both the Life Assured as well as the Proposer. Similarly, if you purchase an insurance policy for a family member, then you are the proposer and the family member is the Life Assured.

Nominee or Beneficiary: It is the person you appoint at the time of buying the policy to receive the benefits of your insurance policy, in your absence.

Insurer: The insurance company that sells the life insurance policy is called the Insurer (for example, ICICI Prudential Life Insurance).

Life Cover: It is the amount that the Insurer will pay to your Nominee in case of an unfortunate event.

Maturity Benefit: For Protection + Savings policies, the Insurer pays a certain lump sum of money on completion of the policy term. This amount is known as the Maturity Amount.

Premium: A premium is the amount you pay to the insurer for receiving the benefits of the insurance policy. These payments can be made on a regular basis throughout the policy duration, for a limited number of years or just once, as per the options available under the policy you choose.

Premium Payment Term: The number of years for which you pay the premiums is known as the Premium Payment Term.

Policy Term: The number of years for which the Life Cover continues.

Benefits of life insurance

Tax benefits: Enrolling for a life insurance policy can guarantee you tax benefits.The premiums you pay towards the policy make you eligible for tax exemptions of up to ₹1.5 lakhs of your taxable income, under Section 80C of the Income Tax Act. The death benefits are also fully tax exempt, under Section 10(10)D of the ITA.

Guarantee of fix returns: Life insurance policies guarantee that you get a fixed amount after a fixed timeline. You need to go through the structure of different life insurance products.Read through the structure and terms and conditions of different life insurance products to choose a policy that best suits your needs. Whatever you choose, you can rest assured that the promised death benefits will be disbursed to the beneficiary, if the information provided by you at the time of enrolling for the policy was accurate.

Risk mitigation and coverage: These policies provide the quintessential risk coverage in terms of monetary compensations to mitigate and cover risks after the policyholder’s death.By enrolling for life insurance, you are protecting your family against financial risks that would occur if the primary breadwinner meets an untimely death.

Provision for loan: Certain policies provide the option of loan and allow to borrow a sum of money.This means that if you need to take on a loan, for instance, to fund the education or marriage of a child, you can use the life insurance policy as collateral.

Health expense coverage: Most of these policies cover the health and treatment expense that may occur.occur if the policy holder falls ill. You can also choose riders to increase the coverage of the insurance policy to protect your finances even while you are alive.

Term Life Insurance

Term insurance policies provide the predefined amount of money to the policyholder’s family, only if the policyholder dies during a specified term. No claim if the insured person survives till the end of the policy period. This policy essentially remains active for a predefined time and is one of the affordable policies available in the market.

Whole life insurance

Whole life insurance as the name suggests provides you cover at all points of your life in which the policy is in force. This coverage time can go as long as 100 years. These policies also offer loan facilities to the policyholder. The overall process of buying is simple and can be done online as well through a simple process.

Money Back Policy

The main difference and advantage of money back policy is that it gives the policyholder different survival benefits which are linked to the period of the policy. Unlike other policies, this policy gives you money during the policy period. Regardless of the instalments paid, if the policyholder dies, the family gets the entire sum. These policies are expensive as compared to other counterparts.

Endowment Policy

Endowment policies are different from term insurance policies in a way that in case of these policies, the insured gets a lump sum amount of money if s/he survives till the maturity date. The policy offers insurance with savings at the same time. They also come with riders that may be used to increase the coverage of the policy. In case of death, the endowment policy guarantees that along with the sum a participation profit is also paid according to the nature of the policy.

Retirement Plans

Retirement plans, in simple terms, can be defined as those plans that guarantee fixed income after your retirement. They aid in creating a retirement corpus. This corpus is then invested to generate post-retirement money flow, thus creating a financial cushion and helping in risk mitigation. The money is rolled out in the form of monthly pension. All in all, these policies help the insurer in achieving the financial goals of long term nature. In the advent of the internet, almost all the companies claim to have the best life insurance online. However, one must read the fine print carefully and should check carefully, if the policy offerings match with individual requirements.

Principles of Life Insurance

In India, we follow four basic principles of life insurance.

Insurable Interest: This principle has been put in place to protect insurance policies against any kind of misuse. It refers to the level of interest that the potential policy holder is estimated to have in the life insurance policy. This interest could be in the form of a personal relationship, family bond, etc. Based on this interest level, the insurance company approves or rejects the individual’s application for a policy.

Minimal Risk: Any company that provides life insurance is taking on some level of risk, since they would need to pay the assured sum at some point of time. Therefore, the company would prefer to keep the level of risk as low as possible. To ensure this, the insurer might check the applicant’s medical status, smoking habits, etc. In addition, they might expect the policy holder to take good care of their health.

Good Faith: As mentioned earlier, a life insurance policy is essentially a contract between the insurer and the policy holder. This contract is entered into on good faith that both parties are providing accurate relevant information, without hiding anything. If any information is withheld, it could lead to serious consequences. For instance, if the insurance provider discovers that the policy holder had a pre-existing heart condition but did not divulge the fact at the time of policy purchase, they could reject the claim made by the beneficiary, following the demise of the policy holder.

Law of Large Numbers: This is a key principle of life insurance, which is based on a statistical theorem that states that with larger numbers, fluctuations tend to average out. This essentially means that since life insurance is a long-term investment, the losses and gains will average out over time, minimizing the risks for the policy holder.

Protection Plans (Term Insurance)

Wealth Solution Plans (ULIPs)

Saving Solutions Plans (Endowment and Money Back)

Child Care Plans (Education and Marriage Endowment)

Pensions / Annuity Plans (ULIP and Traditional Plans)

Our life insurance partners:

https://www.bajajfinserv.in/insights/life-insurance-and-general-insurance

https://www.turtlemint.com/health-insurance/articles/definition-types-features-general-insurance-india/