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Life Insurance

Life Insurance is a medium to protect your family from the financial losses which arises in the case of an unfortunate event of death or disability of an individual. Life Insurance is a legal contract wherein Life Insurance Company assures you to pay a certain amount in case of an unfortunate demise of the human life on whom the policy has been taken or on the maturity of a specified term (whichever is earlier) based on the kind of life insurance product opted for. To keep your Life insurance policy active an individual needs to pay a quantified amount to the insurance company.

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Basic Terminologies used in the Life Insurance Parlance
The Insurance Company is known as the “INSURER” .
The person whose life is being insured is known as the “INSURED”.
The payout from the life insurance company in case of the unforeseen demise of the insured or at the time of maturity is known as the “SUM ASSURED”.
The policyholder agrees to make a periodic payment as consideration for buying the insurance policy to the company is known as “PREMIUM”.
The representative or beneficiary appointed by the Insured to be the receiver of the death claim is known as the “NOMINEE”.
The event where the guaranteed benefits are paid out is known as “CLAIM” .In case of unfortunate demise of the insured, the event is termed as “DEATH CLAIM” and in case of completion of the term the event is termed as “MATURITY CLAIM“.
The top up or additional benefits associated with the base policy and which can be taken by paying an extra nominal amount of premium by the policyholder are known as “RIDERS”.
An extra amount provided by the life insurance company over and above the base sum assured either on maturity of the policy or death of the policyholder is known as “BONUS”.
Types of Life Insurance Plans

Life Insurance has multiple types of Plans to accommodate your specific goals and objectives

1. Term Plan:-

The Term insurance plan is the purest form of insurance which provides protection only, with no element of saving. Under the term plan agreement, the policyholder agrees to pay a certain amount in the form of premium in return. The insurance company ensures the policyholder to pay the amount equivalent to the sum insured to the beneficiary/nominee declared in the policy, after the death of the life insured within the policy period, provided the policy is enforced. The Policy terminates after compensating. The term insurance plan gives a sense of financial security to the family/dependents of the life insured. It is meant for indemnity purpose only, and should not be taken for making profits out of it.

2. Endowment Plan:-

Endowment plan provides the dual benefit of Insurance and Investment as well. Under Endowment Plan some portion of the premium component is allocated for the mortality charges to give you the life cover and some portion is invested by the insurance company on which it offers you return or bonus. Endowment plan offers death or maturity benefit whichever is earlier during the term of the plan. In the event of the unforeseen death of the policyholder the insurance company pays the death benefit which is the accrued Sum Assured to the appointed nominees and the policy ceases. But if the policyholder survives the term of the policy, then the Policy holder receives the maturity benefit which is ‘Sum Assured’ plus the ‘accrued Bonus’ accumulated in the policy.

3. Whole Life Plan: -

Whole Life plan as the name suggest is for the whole life of the person or generally the maturity age which is 100 years. This plan provides you the insurance coverage throughout the life time. In case of unforeseen death of the policy holder during the policy term, the life insurance company pays the death benefit, i.e. the Sum Assured plus the Accrued bonus if applicable as per the terms of the policy to the appointed nominees and the policy terminates. But if the policyholder survives the term of the policy, then the Policy holder receives the maturity benefit which is sum assured plus the accrued Bonus accumulated in the policy.

4. Child Insurance Plan:-

This plan caters to the need of unstoppable education for your child throughout his or her life. The aggravating Education cost is a concern for the parents, especially in pursuing higher education, the cost of education has been enhanced over time. The child insurance plan gives a certain payout to the nominee (who is a child generally in these products) in the event of death of the policy holder. The policy does not terminate rather continues and the company waives off, the future premiums and pays out money at periodic intervals as opted by the policy holder at the inception of the policy.

5. Money Back Plan:-

This product as the name suggests, provides periodic payments, known as money backs or surviving benefits which are some percentage of the total Sum assured to the policy holder during the policy term and once the policy holder survives the term of the policy he or she gets the remaining Sum Assured plus accrued bonus, if any as the maturity benefit and policy terminates. In case of death of the policyholder during the term of a policy the nominee gets the due Sum Assured and the policy ceases.

6. Retirement plan/Pension plan:-

The retirement plans help the person to build a corpus to sustain their post retirement life. It helps the individual to live an independent financial life post retirement. The insurance company then on attaining the chosen retirement age starts giving pension amount to the policyholder as pension payout in terms of periodic payments opted by the policyholder. In case of demise of the policy holder the spouse or the children can receive a lump sum amount or the periodic pension payout.

7. Unit Linked Insurance Plans (ULIP’s):-

Unit Linked Insurance Plans are market linked plans where the policy holder decides where his money should be invested based on certain funds. These plans are transparent in nature and allow you the flexibility to choose where to invest as per the risk appetite. The ULIP’s also provides a dual benefit of providing an insurance cover and also work as an investment tool. The ULIP’s provide a wide range of flexibility option to change the fund, redirections in the plan and switching of funds. If the policy holder sustains the policy term he or she gets the fund Value and if the policy holder dies during the policy tenure the nominees gets the Death benefit which is usually the Sum Assured or it may vary as per policy specifications.
Need for Life Insurance
The need of buying a Life Insurance plan is listed below :

For Meeting the Financial Loss

In case of unforeseen demise or disability of the earning member of the family there is a huge emotional and financial loss to the family. Emotional loss cannot be compensated, but to take care of the financial loss life insurance is an appropriate medium to secure the loss.

For Meeting Long Term Objectives

Life Insurance helps in meeting the long term objectives like accumulating or saving wealth for a child’s education, child’s marriage, and post retirement life. There is a wide range of Life Insurance products available to cater all these goals and objectives in human life.

Work as Tax Saving Tool

Life insurance plans can also be considered as the tax saving tool in a way that premiums paid for life Insurance Plans are eligible for tax deduction under Section 80C of the Income Tax Act 1961 (Act) and Maturity Proceeds are also eligible for exemption under Section 10(10D). Under Section 10 (10A) (III) Commuted Pension received from Pension fund under pension plans approved by the regulator would be tax-free.

For Facilitating Savings

Life Insurance helps an individual to save at an early stage and plan for a better future. Life Insurance helps in the accumulation or saving process for a better tomorrow. With periodic payments you can save and invest your hard earned income to protect your future and for a better future for your loved ones as well.

Benefits of Life Insurance

Provides Risk Cover

Life Insurance policy provides financial protection in today life which is full of uncertainties. By taking life insurance we provide a fiscal benefit to your loved ones in the event of unfortunate death of the earning member of the family.

Planning for Bigger Objectives

Life Insurance along with providing financial assistance also acts as a long term investment tool. You can meet your life’s bigger objectives like children's education and their marriage, building your own home or planning a relaxed retired life. This all can be done by saving periodically and planning in advance, as per your life stage and risk appetite.

Builds the Saving Habit

Life Insurance is a long-term contract where you have to pay for a fixed amount periodically for a policy term. This builds and creates the habit of long-term and regular savings. Saving small amounts regularly will build a decent corpus to encounter financial needs at various life stages.

Facility of Loans

Your life insurance policy is your asset. You are entitled to take loans against your active policy without affecting the policy benefits.

Tax Benefits

Life Insurance plans provide attractive tax-benefits under section 80 C and 10(10 D) of Income Tax Act,1961.
Factors Determining Life Insurance Sum Assured
Taking adequate life insurance coverage or Sum Assured is the most imperative step. If you have opted for less insurance cover or you are grossly under insured then also the entire purpose or intent of taking the life insurance is defeated.
In order to assess your life insurance coverage (sum assured), you need to consider the different factors and answer these following questions such as-
The policyholder agrees to make a periodic payment as consideration for buying the insurance policy to the company is known as “PREMIUM”.
How much debt/liabilities do you have to be paid?
How much money your children will require to pursue their basic education and higher education?
How much money you will require for the marriage of your children?
How much money your family will require to maintain the same lifestyle in case of the unforeseen happening?
How much money you require post retirement to lead the identical independent life?
Considering the above mentioned liabilities and objectives in mind one needs to decide the Life insurance coverage.
Factors Determining Your Premium Amount
There are a number of factors responsible for determining life insurance premium. Some of these factors are out of your control; while some can be managed. The insurers take various factors into consideration while determining the life insurance premiums. But age, lifestyle, gender, health condition and the profession are some of the major factors that affect the premium amount.

Age

Age is the biggest determinant for premium rates. The concept is - the younger you are, the lower the premium will be. Arguably, the risk factor attached to the younger life is lesser than the elder life. That's why financial planners advise you to buy life insurance cover before it's too late.

Gender

Statistics states that the average life of women is 4-5 years more than the men. Keeping this data into consideration, the life insurance underwriters determine gender based premium rates, a higher premium rate for men as compared to women basis the longevity.

Health

Most insurance companies have a medical test as part of their underwriting process. If you have health conditions such as - higher cholesterol, abnormal blood pressure, diabetes, heart problem or any other medical disorders, you need to pay higher premiums as the risk in your life enhances because of these health concerns.

Lifestyle

Your lifestyle plays an important role in determining the premium rates for a life insurance company. Habits such as - smoking, chewing of tobacco and drinking, etc. increase your life insurance premium rates significantly because the risk level increases due to such habits.

Profession

Life insurance companies also take profession of the life insured as a factor while determining premium rates for him/her. Risk attached to professions such as - mining, gas, fisheries or in other hazardous industries is very high compared to that of doctors, engineers, advocates etc. Therefore, insurers charge higher premiums to persons working in high risk industries.

Body Mass Index (BMI)

BMI is a person's weight divided by the height. It is taken into account because a high BMI range can lead to the likelihood of developing dangerous health conditions is robust. Such proposals are often charged with higher premium amount or the proposal can be declined as well.

Add- on Covers /Riders
Riders are an additional cover attached to your base policy which will provide you enhanced benefits over and above your base policy. Following are the rider options:

Term Rider

An additional benefit or cover attached to your base life insurance policy that provides additional term coverage for the fixed specified amount. If the insured dies during the policy term, the designated beneficiary(ies) can receive term rider sum assured as well as benefit proceeds.

Critical Illness Rider

There are few illness which makes an individual disabled temporarily or permanently which may result in loss of work and thereby stoppage of family income. The treatment of such illnesses requires huge amount of money due to the high medical cost. Such financial burden of treatment and loss of earning is indemnified by the critical illness rider. Some of the most common critical illnesses include Heart attack, Cancer, Paralysis, Coronary artery bypass surgery, Major organ transplant and many more.

Accidental Death Benefit Rider

Accidental death benefit rider provides additional financial benefits to the family in case the policyholder dies an accidental death. There is an additional accidental death Sum Assured which gets attached to your base Sum Assured. So in the event of policyholder dies out of accidental death, his family will be provided with the base sum assured of the policy plus the accidental death benefit Sum Assured as well.

Waiver of Premium Rider

This rider provides an assurance that your life insurance policy doesn't get entitled to surrender in case you stop paying premiums due to disability or income loss. With this rider all the future premiums will get waived off by the insurance company keeping your policy in active mode as always. So in the event of death during the policy term, the beneficiary will receive the financial benefits as per the policy conditions.

Income Benefit Rider

The rider provides the option of allocating the financial benefits in case of a claim, in installments to cater to the future needs of your family and to make them receive a periodic flow of income. Under income benefit rider basis your Sum assured you may decide the number of months you’d like your beneficiaries to receive payments and can decide the distribution plan which suits best for your family.

Permanent & Partial Disability Rider

This rider is beneficial to cater to the unforeseen events apart from death like in case you face permanent disability or temporarily due to accident. The disability benefit rider enables you to take benefit for this particular risk. This rider will replace your income for the specified tenure. The amount you get vary on the kind of disability. On the total disability, you will get the full sum assured where as in the case of partial disability, you will get the partial sum assured. Also, there is an option that the sum assured is given in installments subject to the terms and conditions which differs with the insurance company.
Policy Exclusions
The most common life insurance exclusions are:

Suicide Clause

Insurance companies don’t pay for claims in the event the policyholder commits suicide within one year of buying the policy. Some insurers extend this period up to two years as well.

Dangerous Activity

This exclusion says that the death of an insured because of certain dangerous activities like auto racing, rock climbing, hang-gliding, etc., will not be liable for the payment of the policy proceeds. Few insurer’s may cover such activities at a very high premium rates.

Aviation Exclusion

This exclusion suggests that the insurer’s will only pay if the insured is killed in a commercial plane crash where as if the individual dies as a passenger in a private plane in that case the insurer will not pay the policy proceeds.

Act of War Exclusion

This exclusion suggests that the insurance company will not pay if the cause of death is a result of war.
Benefits of buying Online Life Insurance
As Internet dispersion grows manifold in India and people becoming increasingly comfortable with transacting online, we are witnessing a huge online buying and selling of products and services in the country. Online Buying of insurance has propelled the customer to make informed buying decisions. Listed are the various benefits associated with buying online Insurance.

1. Cost Effective

Online buying allows insurance companies to save their operational cost by 20-25% by cutting on intermediary commission, cost of an agency, physical cost of branches and the cost of paper proposal forms. That is why insurance companies offer cheaper premium rates, because this saved cost is passed on to the customer buying online. Insurance policies purchased online are generally less expensive as compared with the basic traditional sales model .So the customer gets higher coverage at a lower premium cost.

2. Time Saving

In today’s time the only shortage we have is about time. We don’t have ample time to do things. When it comes to buying online insurance, it saves a lot of time of an individual. At a click of a button you are eligible to buy insurance online. The online buying process is a time saving process as compared to buying offline.

3. Convenience

Convenience of access is a major differentiator; all you need is an Internet connection to purchase a policy online. We all are ready to pay for things, but the prime factor is of convenience in today’s hectic life scenarios. The advantages of online buying insurance include instant issuances of policies and customization, toll-free numbers for assistance or live chat facility to the customer for resolving doubts and making the buying decision easy.

4. Option to Compare

One of the huge advantages of buying online insurance is that it allows you to make an informed buying decision in a simple and appropriate manner. You can choose, compare and buy the right insurance product for the right purpose. Comparing allows you to differentiate between the cost and features of various plans offered by top insurance companies. Online buying also facilitates the correct understanding of the product features and thus allows you to make a decision as per your objective and need.

5. Option to check the track record of the Insurance Company

With an advancement of social media, various customer platforms and websites, you can extract enormous information and feedback about the insurance company and their plans by the views of industry experts, regulator, existing customers and extract a fair idea about the track record of a company financially by knowing their solvency ratio, claim settlement ratio, customer service performance and various other parameters .All these information helps the customer to make an informed buying decision.

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