What is Life Insurance?
A life insurance policy is something that provides a dedicated sum of money on the demise of the policyholder or after a certain period of time.
Life insurance is a contract wherein an individual is offered financial coverage by an insurance company in exchange for a payment over a period. The payment made to the insurer is referred to as the premium. In case the policyholder passes away during the policy tenure, the insurance company will offer a lump sum amount to his/her nominee. This lump sum amount is called the sum assured on death or the death benefit. Upon completion of the policy term, the policyholder receives a sum assured on maturity or the maturity benefit from the insurer along with some bonuses.
A pure protection plan, such as a term insurance policy, offers only the death benefit. However, there are several types of life insurance policies that offer savings in addition to protection. The savings can be in the form of a maturity benefit or bonus. Premiums paid and benefits received under life insurance are liable to tax benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961.
Benefits of a Life Insurance Policy:
Life Insurance policies offer several different benefits to individuals and some of them are mentioned below:
- Risk Cover: Since uncertainties are unpredictable and may cause problems to an individual and his/her family at any time, availing a life insurance policy will ensure that your family and dependents continue to enjoy a quality lifestyle in case of your unforeseen and accidental death.
- Comprehensive Plan for Different Stages of Life: Not only does life insurance offer financial support in case of the policyholders unforeseen and accidental death, but also serves as a long-term investment in the sense that it encourages you to lay down your objectives, whether it is the education of your children, their marriage, constructing the home of your dreams, or even planning for a peaceful retired life. The planning will be done based on your risk appetite and life stage. Most conventional life insurance plans, such as traditional endowment plans, provide specific maturity benefits and built-in guarantees via a number of product options like Guaranteed Maturity Values, Guaranteed Cash Values, Money Back, etc.
- Cover for Increasing Health Expenses: Whether it is through stand-alone insurance policies or through riders, all life insurance providers offer financial cover against hospitalisation expenses and critical illnesses. Since health expenses are increasing constantly, the need for health insurance policies has increased too, as it ensures that the policyholder will have minimal medical costs to deal with.
- Promotes Savings in the Long Run: Since life insurance policies are long-term agreements wherein the policyholder is required to make a fixed periodical payment, it helps the policyholder inculcate the habit of savings.Saving money regularly over a relatively long period of time helps in building a good corpus which will in turn help in meeting your financial requirements at different stages of life.
- Profitable and Secure Long-Term Investment: The insurance industry is highly regulated. The Insurance Regulatory and Development Authority of India has implemented several regulations through which the money of the policyholder is ensured to be safe with the stakeholders, which means that all the money you invest in your life insurance policy will be the responsibility of the stakeholders of the company through which you avail your policy. Since life insurance is a long-term savings product, it also ensures that the policyholder focuses on long-term returns rather than focusing on risky investment decisions that could provide short-term profits.
- Guaranteed Income via Annuities: When it comes to planning for retirement, there are few instruments as effective as life insurance policies. Since you will be saving money over a period of time, life insurance policies will help in providing a steady source of income after you have retired from professional life.
- Growth via Dividends: Conventional life insurance policies provide customers with an opportunity to take part in economic growth, while taking no investment risk whatsoever. While the policyholder splits the investment income through yearly announcements of bonus / dividends, the policyholder will earn maturity benefits in addition to contributing to economic growth.
- Loan Facility: People who obtain life insurance plans will have the option of borrowing money against it, which may assist them cover unforeseen expenses as they progress through life without jeopardising the policy's benefits.
- Redemption of Mortgage: The finest tool for covering loans and mortgages taken out by the policyholder is a life insurance policy. The insurance can be used to pay off the loan or mortgage if there is ever an unanticipated circumstance that prevents the policyholder from being able to repay his or her loan or mortgage. In this case, the grieving family members will not be responsible for repayment.
- Tax Benefits: Life insurance policies offer attractive tax benefits and help you save a significant amount of money which would otherwise be spent on taxes.
Popular Pick On Life Insurance
New Plans from Life Insurance Corporation of India
Life Insurance Corporation of India or LIC (as is popularly known) is the first-ever state-owned general insurance company in India to have commenced operations. Till date, LIC remains to be one of the most reputed insurance companies providing comprehensive health and life insurance policies to its customers. LIC came into origin in the year 1956 and since then it has managed to carve its own niche in the sector of insurance. LIC offers a wide range of insurance products to its customers from endowment plans, and Unit-Linked Insurance Plans, to moneyback plans and term insurance plans. Whatever insurance needs and requirements you have in life, Life Insurance Corporation of India will fulfill it easily and in a hassle-free manner.
What are the Different Types of Life Insurance Policies in India?
Types of Life Insurance Policies:
- Term Life Insurance Plans
- Endowment Policies
- Unit Linked Insurance Plans(ULIP)
- Money Back Policies
- Whole Life Policy
- Annuity/Pension Plans
*Note – The term varies from plan to plan, with the numbers mentioned above reflecting an overall average.
Top 10 Life Insurance Companies in India:
When it comes to life insurance, the standard idea of the product is that if you pass away, an insurance company will pay your family a large sum of money. But that is not the only benefit that a life insurance product has to offer. A life insurance policy can also be used to plan for upcoming and unforeseen expenses through schemes like ULIPs (Unit Linked Insurance Plans) that provide returns through investment in the markets.
Below are some of the popular life insurance companies in India:
Life Insurance Corporation of India
- Life Insurance Corporation of India or LIC is one of the oldest state-owned insurance company in India.
- 15% discount and other benefits at leading restaurants across India.
- The corporation made its IPO public on 4 May 2022.
- 18 years is the minimum age of entry for Life Insurance Corporation of India.
SBI Life Insurance
- SBI Life Insurance is responsible for providing life insurance policies to more than a million Indians in today’s date.
- The company was established as a public limited company in Mumbai on October 11, 2000. On November 20, 2000, the RoC issued the company a Certificate of Commencement of Business. On March 29, 2001, the company registered with the IRDAI to conduct the business of life insurance.
- The headquarters for SBI Life Insurance is situated in Mumbai.
- SBI life insurance has a minimum entry of age of 18 years to take a life insurance
HDFC Standard Life Insurance
- HDFC Standard Life Insurance is a highly reputed private insurance company operating in India today.
- The insurance corporation is considered one of the most reliable life insurance companies in India.
- The company produced effective returns on operating Earning Value (EV) of 20% for the previous three fiscal years.
Max Life Insurance
- Max Life Insurance is a renowned general insurance company currently offering policies to millions of Indians.
- The channels of distribution for Max Life include, among others, banks, private agents, brokers, and corporate agents. It offers things that are linked, participating, and not participating.
- It provides both people and groups with child protection, retirement, savings, and growth plans.
- The minimum age of entry for Max life insurance is 18 years.
Bajaj Allianz Life Insurance
- Bajaj Allianz is a highly reputed and renowned insurance company that offers the best deals on policies.
- The insurance company provides insurance ranging from car insurance, life insurance, health insurance, etc. To their customer base.
- Bajaj Allianz life insurance has a minimum age of entry of 18 years.
Kotak Mahindra Life Insurance
- Kotak Mahindra is one of the best insurance companies currently operating in India with millions of customers.
- The products offered by Kotak Life Insurance include rural plans, term plans, savings plans, children's plans, retirement plans, and investment plans at low premium rates.
- These products are affordable to individual investors and can meet their lifetime needs.
- Each insurance plan is created to offer the maximum protection possible in addition to benefits and keeping in mind the needs of the various segments of society.
- For Kotak Mahindra life insurance plan, the minimum age of entry is 18 years.
Reliance Nippon Life Insurance
- Reliance Nippon Life Insurance is one of the most reputed life insurers currently functioning in India.
- The company caters to four different segments: protection, children, retirement, and investment programs. It offers life insurance policies that are aimed at both individuals and organisations.
- For many years, the company has been ranked as one of the top five private insurance companies in the country.
- The minimum age of entry to take a policy with Reliance Nippon life insurance is 18 years of age.
PNB MetLife Insurance
- PNB MetLife is a highly reputed insurance company currently providing life insurance policies to more than a million Indians in today’s date.
- Through its bank agreements with PNB, Jammu & Kashmir Bank Limited (JKB), and Karnataka Bank Limited, PNB MetLife today operates more than 150 branches around the nation and services clients in more than 7,000 locations.
- The minimum age of entry for this scheme is 18 years.
Edelweiss Tokio Life Total Protect Plus
- Explore The Edelweiss Tokio Life is a reputed insurance company that provides life insurance till the age of 100.
- It also provides child protection cover and various benefits for your better half.
- The minimum sum assured for total protect plus is Rs.50,00,000.
- The minimum age of entry for this policy plan is 18 years.
Birla DigiShield Plan
- The life insurance cover is available for 1 year to 100 years with Birla DigiShield plan.
- Provides the option to cover your better half under this scheme.
- The minimum sum payout under this scheme is Rs.50,00,000.
- The minimum age of entry for this policy is 18 years.
Documents Required for Buying a Life Insurance Policy:
Following are the documents you will require to purchase a life insurance policy:
- Passport-sized photographs.
- Age Proof (Driving License / PAN Card / Passport / SSC Certificate).
- Proof of Residence (Passport / Telephone Bill / Electricity Bill / Ration Card / Water Bill / Voter ID).
- Identity Proof (Ration Card / Voter ID / PAN Card / Passport / Driving License).
- Proof of Income (Pension Pass Book / Income Tax Returns / Form 16 / Salary Slip).
How to Claim Life Insurance?
Life insurance claims are made under two circumstances:
- Death of the life insured
- Maturity of the life insurance policy
Life insurance Claims in Case of Death:
Here, nominees or close relatives of the deceased make the claim (or assignees if the policy has been assigned) in the following way:
- Inform the insurer as soon as possible with details such as time of death, place of death and cause of death.
Submit the relevant documents to the insurer. This will include:
- The death certificate of the deceased person along with the claim form as provided by the company.
- The policy in its original form as this is a legal document and proof of an insurance agreement that covered the life of the deceased.
- Discharge form which has to be signed with witnesses.
- If the policy was assigned, the assignee will have to provide the deed.
- If a claim is made by someone other than the nominee or assignee, the person making the claim will have to submit legal proof of his/her title.
- If required, post-mortem reports and hospital and attending doctors reports will also have to be submitted.
- In cases involving police inquiries, an inquest report will have to be submitted.
While these outline the standard set of documents required to process a claim, other evidence may be required such as an employers certificate or any other forms or reports that will help resolve any issues thrown up during an insurers claim verification or investigative processes.
Rules for Beneficiaries Claiming Life Insurance
When a policyholder’s beneficiary or nominee is claiming life insurance, he or she will be required to follow certain rules. The nominee will have to file a death claim in order to procure the death benefit. If you have a physical insurance policy, you can take a claim intimation or a notification form from your life insurance provider. If you have an online policy, you can apply for a form online.
- Your claim intimation will need to comprise elements such as policy number, name of the policyholder, place of death, name of the insured, name of the claimant, etc.
- The nominee will first have to fill a few death claim forms and also provide some proof of death. Once the form is filed with the life insurance company, then it is established that the company has got a death claim.
- Next, the nominee will need to assemble all the appropriate documents that serve as proof.
- Then, the nominee will need to furnish these documents to the company for the claim settlement process.
- Once the forms and documents are submitted, the company will verify everything and then make a decision about if the claim should be settled or not.
How to Save Tax with a Life Insurance Policy?
Being insured in today’s date is of utmost importance. Even if your partner has a life insurance policy and a group policy from his/her company, it is important that you purchase a comprehensive life cover for yourself. Covering your life will not reduce the emotional distress that you may be going through, but a life insurance policy will ensure that you have adequate financial backup during times of your need. The insurance market is currently flooded with insurers selling a horde of insurance products and services. While selecting a particular life insurance policy, it is imperative to understand the tax implications of the same.
Section 80C of the Income Tax Act Deduction: If you are currently paying a premium towards your life insurance policy or for the life of your parents, children, or spouse, you will be eligible for a deduction under Section 80C of the Income Tax Act. Irrespective of whether your child is a minor or not, the deduction shall be applicable. However, in order to be able to claim the said deduction, the premium amount (being paid by policyholder) must not be more than 10% of the sum assured amount, in case the policy was issued after 1 April 2012.
Section 10(10D) Maturity Deduction: If the premium amount (being paid by policyholder) does not surpass 10% of the sum assured for plans that have been issued post 1 April 2012 and 20% of the sum assured for plans that have been issued before 1 April 2012, then the maturity amount that the policyholder receives at the end of the policy term will be completely exempt from tax as per Section 10(10D) of the Income Tax Act, 1961.
Women are becoming more and more empowered in all aspects in India. These days they are not only contributing to household chores but are also working shoulder to shoulder alongside men. Gone are the days where the man of the house was the sole breadwinner.
This is probably the reason why women need life insurance just as much as men in India. Women typically have the tendency of taking their financial protection for granted, hence miss out on purchasing life insurance or health insurance policies for themselves. Mentioned below are a few reasons why women should invest in life insurance policies in India:
They offer financial protection – Life insurance is essentially reliable because it offers a sense of security and protection to the policyholder and his/her family members. Moreover, when you are financially responsible for your family, no compromises should be made on protecting the same.
Life insurance policies help in savings growth – Women have always been successful with their attempts at traditional money saving, through a piggy bank, for instance. However, with the introduction of market-linked investment plans like ULIPs or endowment plans, it has now become possible to receive returns on your investment alongside coverage and protection.
Life insurance provides protection during critical illnesses – The cost of medical treatments and surgical procedures have skyrocketed, especially in the preceding years. The diagnosis of a critical illness can render the whole family helpless, in terms of finances. Moreover, if the breadwinner of the family is the sufferer, it creates an even greater financial burden on the family of the policyholder. In such a scenario, a comprehensive life insurance or health insurance policy will provide coverage and protection and thus help the family tide over the financial loss.
Life insurance policies are cost-effective – According to a study conducted recently, females outlive men and hence their life expectancy is longer. This is the reason why insurance companies see women as less risky than men and hence their premiums are highly cost-effective.
Life insurance provides the scope for retirement saving – Relying completely on the retirement investment plan of your husband might not be the most advisable thing to do. Instead, you should purchase a comprehensive life insurance policy for yourself, to help enhance the already existing retirement savings.
What are the Types of Life Insurance Policies Suitable for Women in India?
The following types of life insurance policies are most suitable for the women in India:
Term insurance plan:With the help of a term life insurance policy, you can keep all your loved ones safe and secure. Moreover, term plans come at an extremely concessional rate, and are therefore much more cost-effective than traditional life insurance policies. You should purchase a term plan early on in life as that will fetch you lower premiums.
Critical illness coverage policy: To ensure that you receive standard medical treatment in the event of occurrence of a critical illness, it is imperative that you purchase a critical illness coverage plan. This is an enhancement for your existing financial investment planning.
Endowment life insurance policy:Such plans can help you build your savings. Through endowment plans you can achieve your long-term or short-term goals.
What’s the Average Cost of a Life Insurance Plan and what Affects the Price?
LifeLife insurance policies are known for insuring the life of the insured and also for providing a lump sum amount to the insured’s family after the former (the insured) passes away. The insurance market is flooded with numerous insurance policies offered by various insurance providers. Hence, choosing a life insurance policy that best suits one’s needs has become a convenient process.
However, before investing in a life insurance policy, it is important to analyse the cost and one’s needs, and invest accordingly.
Factors Affecting Life Insurance Policy Premiums:
- If an individual is overweight or obese, he/she will be required to pay extra an premium for his/her life insurance policy.
- If an individual is part of a risky occupation like race car driving, insurance companies are typically skeptical towards such professions because of their high risk. Hence the premiums are high.
- If an individual is a smoker, his/her risks are increased, and hence, he/she will be required to pay extra premiums towards the life insurance policy.
- If an individual is a heavy drinker, he/she will be required to pay extra premiums.