What is life insurance?

Life insurance is an arrangement wherein the policyholder purchase in financial protection from the insurance company by paying the insurer small premium at regular intervals.

Apart from financial protection, people are attracted to life insurance as it is eligible to get tax deductions under Section 10(10D) & Section 80C of the Income Tax Act, 1961

Benefits of Life Insurance

We all know that life is unpredictable and such uncertainties can cause problems for individuals and his/her family at any time. So, availing a life insurance policy will make sure that your family and dependents can easily enjoy and can maintain their standard of living in case of any unwanted emergencies. There are several benefits that life insurance offers to the policyholders. Let's have a look at the most significant ones.

Guaranteed Annuity

On the subject of planning for retirement, there are few units as powerful as a life insurance policy. Due to the fact that you will be saving money over a period of time, life coverage policies will help in supplying a steady source of profits after your retirement.

Loan Facility

Folks that avail life insurance could have the choice of availing a mortgage towards their insurance coverage that may help them meet their unplanned life degree requirements without hampering the advantages supplied by means of the policy they've purchased.

Comprehensive Plans

Along with financial support, it also serves as a long-term investment option. Many conventional life insurance plans, such as traditional endowment plans offer specific maturity benefits via multiple product options like maturity values, cash values, money-back, etc.

Health Expense Cover

Whether it is through stand-on my own insurance policies or via riders, all life insurance companies offer economic coverage against hospitalization costs and crucial illnesses. On that account, health expenses are growing constantly. The requirement for medical insurance rules has improved too, as it ensures that the policyholder will have minimum scientific fees to deal with.

Boom Through Dividends

life insurance policies provide clients with the possibility to participate in the monetary boom of the insurance company while taking no funding threat in any way. At the same time as the policyholder breaks up the funding earnings through yearly announcements of bonus/dividends, the policyholder will earn maturity benefits.

Tax Advantages

Life insurance offers appealing tax benefits and helps you save an extensive sum of money. Almost all the Life Insurance policies offer you the benefit of the tax deduction on payment of premiums and also provide tax-free Sum Assured under Section 80C and 10(10)D of the Income Tax Act, 1961 respectively.

Loan Reimbursement

Life insurance policies function the fine viable device for the coverage of loans and mortgages availed by the policyholder. If there is any unforeseen situation due to which the policyholder isn't able to pay off his/her loan, the bereaved circle of relatives will no longer have the weight of compensation, and the policy can be used to pay off the mortgage.

Insurance with Savings

Since life insurance is long-term agreements wherein the policyholder is required to make a set periodical payment. It enables the policyholder to inculcate the addiction to financial savings. Saving cash over a lengthy time frame enables in building a very good corpus with a view in meeting your economic necessities at unique levels of existence.

Long-Term Investment

The IRDA has carried out numerous policies through which the money of the policyholder is secured with the stakeholders. The money spent on life insurance coverage can be the obligation of the stakeholders of the corporation from where you purchased the policy. It additionally guarantees that the insured makes good returns in place of focusing on risky funding choices that might offer quick-term earnings.

Types of Life Insurance

Term Insurance

It provides pure life protection. In this plan, the sum assured amount which the insurer promises to pay would be provided to the nominee or beneficiary as stated in the policy document in case of the insured's death. If you survive in the policy term period, you will get nothing or can get your premium back which basically varies from insurer to insurer.

Whole Life Insurance

In this plan, generally, the insured is given a choice to pay a premium amount till the specified time which is also known as the maturity period. If the insured person reaches maturity, he/she has the option to continue the same till death without paying any additional premium and encashing the sum assured or bonuses.

Endowment Plan

Unlike term plan, the endowment plan pays you out the sum assured along with the profits in both the case of death and survival. This plan charges a higher premium which is being invested in the asset market- Equity and Debt. An endowment is a policy in which the insurer promises to pay the lump sum amount at the time of maturity. Majorly maturities are for ten, fifteen or twenty years up to a definite age limit.

Child Insurance Plan

It provides financial coverage to your child's future needs and allows you to plan his/her future in a better and stabilized way. It is basically a combination of insurance cover and investment that secure multiple stages of your child. Life cover is something that you will get as a lump sum amount at the end of the policy.

Investment Plans

This plan helps you in enhancing your wealth, savings and get insurance coverage along with it. With the motive of improving lifestyle, better & luxurious living aspirations and the growing concern makes people think about investing an amount to secure the future.

Money Back Plan

Money-back plans are just like endowment plans with only a single difference that the payout can be staggered with the policy term period. In this, some part will be returned to the insured on time to time basis as per the policy tenure. In case of death full sum, the assured amount will be paid out. It also includes a bonus. Because of these additional features, the premiums of this plan are higher than the normal life insurance plans online.

Pension Plan

This plan assists you in securing your post-retirement life financially. It is a saving/investment tool that caters to future retirement. For planning your retirement, there are heaps of pension plans available in the market. These plans are different from each other. Their features, benefits & exclusions are different too.

Unit-Linked Insurance Plan (ULIPs)

In all the above plans, you don't have any option to select where you want to invest your money. For securing your capital, most of these plans invest in debts, whereas the Unit-linked insurance plan (ULIP) provides complete authority to you in choosing the best way to invest your money which you can invest in debt and equity as well. If you want to switch the current investment method, you can do the same easily. Those who have good knowledge about the stock market can understand this easily.

Life Insurance Riders

Riders are the add-on features of any insurance plan that provides additional financial coverage to the policyholder. Riders are the innovations of the insurance industry that aims in customizing the insurance plans to the degree which is possible while keeping a standard base plan available. Basically, riders provide extra risk protection; hence the insured has to pay an extra premium for it. Mostly, the riders are bought along with the base insurance plan and cannot be added later. The riders are optional, it provides pure risk coverage and that's why they do not have any saving and investment elements.

life Insurance Riders are :-

Critical Illness Rider: - Major critical illnesses are covered under the policy, such as cancer, failure of kidneys, heart attack, coma, paralysis, etc. Make sure to go through the illnesses covered as different companies offer different illnesses cover.

Accidental Death Benefit Rider :-

If the policyholder dies in an accident, this rider benefit along with the sum assured will be paid to the beneficiary by the insurance company.

Accidental and Total Permanent Disability Rider :-

If the policyholder suffers from complete or partial permanent disability and is unable to work or dies due to an accident, this rider will provide the benefit to the policyholder.

Term Rider :-

Term rider pays a fixed or monthly income to the beneficiary in case the policyholder's demise. This is equal to the predetermined value mentioned in the policy or the base plan coverage.

Waiver of Premium :-

If the policyholder suffers disability due to which he will not be able to afford to pay the premiums of the life insurance plans, the policy may cease because of such a situation. But in case the policyholder opts for a rider, it will waive off the premiums and the policy continue with no restrictions.

Permanent and partial disability :-

Life’s uncertain, and this rider comes as godsend if the policyholder faces permanent or temporary disability due to accident. In such an eventuality, most policies pay out a certain percentage of the sum assured for the next 5-10 years.

Accelerated Death Benefit Rider

If the policyholder is diagnosed with any life-threatening terminal illness such as cancer. his rider will pay a lump sum amount and can be used for the treatment of the policyholder.

Which factors influence your life insurance premiums?

Just like any service or product that comes with a price tag, an insurance premium is the amount you pay the insurance company for the policy you buy. You can either make the payment all at once, as a lumpsum, or in instalments and the plan will be valid for a year. However, not everyone pays the same premium amount. As it depends on several personal details and the kind of insurance policy you pick, this sum can vary from one buyer to the next.

Look at the different factors that influence your premium :-

Personal information

You and your spouse might live in the same house, eat the same food and even share similar habits. That, however, does not mean that both of you would pay the same insurance premium. Your gender, age, job profile, lifestyle, whether you have addictive habits (smoking or drinking), your family’s medical history, and even seemingly irrelevant information such as your annual income and details of daily commute are all considered by your potential insurer. You are then assessed on these factors to arrive at an appropriate premium.

Age :

The younger you are, the lower the premium you pay

Gender :

If you are a woman, you will usually attract lower premium than a man of your age and similar health and background. This is because the average Indian woman lives longer than her male counterpart, as has been corroborated by World Bank data


Addictive habits :

If you are a smoker, your premium would be higher than that of a non-smoker of your age and gender. However, if you are a woman, your premium will be lower than that for a male smoker.

Medical history :

Insurers may ask for your health records and may even ask you to undergo a medical test to check your weight, cholesterol levels, blood pressure, and other metrics that could indicate higher medical risks. Your premium is likely to increase, if your family has a history of high-risk hereditary diseases, such as heart disease or cancer.

Lifestyle & Occupation :

Is your life an adaptation of GTA or does your work entail feeding crocodiles? If your job poses health risks or if you have adventurous hobbies, expect your premium to be on the higher side. (Paragliding is considered a risky sport; being an airline pilot is a risky profession).

Type of coverage :

Have you ever bought a smartphone? If you did, you would know that the price increases along with the features and benefits. Insurance works in pretty much the same way. The level of coverage you choose determines your premium. For example, basic health insurance could cost much less than an elaborate term insurance policy. However, add a rider, like Critical Illness, to your health plan to increase the scope of coverage and the premium increases too.

Sum assured :

What will also have a bearing on your premium is the sum assured: the greater the sum assured, the greater is the premium. Not as complicated as it’s made out to be, right? Well, regardless of how easy it is to buy life insurance, there’s one hurdle that stands in the way of most people making this move – the claim process.

Documents Required for Life Insurance Policy

Age proof :

Any one of the following- Driving License, 10th or 12th mark sheet, Birth Certificate, Passport, Voter ID, etc.

Identity proof :

PAN Card, Passport, Driving License, Voter ID or Aadhar Card which proves one's citizenship.

Address proof :

Electricity Bill, Telephone Bill, Ration Card, Driving License & Passport should clearly mention the permanent address.

How to process life insurance claims?

Making a maturity claim

It simply means that when the policy completes its tenure, a certain amount of money called Maturity Claim amount is settled towards the life assured. It is paid only if the policy completes its due course of time and the policy has been continued properly, i.e. all due premiums have been paid on time. This applicable in all life insurance policies except pure term insurance plans which do not have a Maturity Benefit.

The insurer also sends discharge voucher 2-3 months prior to the date of maturity, mentioning details such as the maturity amount payable

As the insured party, you must sign the discharge voucher, get your signature attested and return the voucher to the insurance company along with the original policy bond

Sometimes a policy is assigned in favour of an entity such as a housing loan company (which keeps the policy document as collateral for giving loans); in that case, this entity will fill in the discharge form. The claim amount will also be paid to it.

Money received from Maturity Claim is tax free as per the current income tax laws.

Making a death Claim

  • Filled-up claim form provided by the company
  • Death certificate (signed by an authorised doctor)
  • Original policy document
  • Deeds of assignments/reassignments, if any
  • Legal evidence of title, if the policy is not assigned or nominated
  • Form of discharge executed and witnessed (by signing a discharge and release form, the claimant declares that the insurer has delivered the insurance benefits and waives any further or future claim against the insurer in respect of the insured)
  • Other documents such as medical attendant’s certificate, hospital certificate, employer’s certificate, police inquest report, post-mortem report, etc.

When should I buy life Insurance?

If you are in your 20s

Twenties are the best time to take a life insurance policy because you get additional benefits, such as, lower premium rates, bigger corpus, early development of saving habits (God knows how many of us really need this!), and more room to experiment with higher risk investments.

If you are in your 30s

By now you would probably have begun a family of your own, or be planning one. The financial security of your family and the future of your children gain prominence. Life insurance should be a part of your financial planning now; there is the plain term plan, but the money-back and child plans are also good options.

If you are in your 40s

This is the time when you will get serious about life insurance: because your income is contributing to your family’s income, you need to manage your dependent parents and their medical expenses, and your children’s educational expenses. Experts advocate a plain term plan at this age, or debt-oriented funds for insurance-cum-investment plans. You should also start planning for your retirement.

If you are in your 50s

Why get insured now? At this age, you may have outstanding debts and mortgage or your daily expenses can eat up your life savings post-retirement. A retirement plan at this stage will help you amass a sound corpus by the time you retire.

If you are in your 60s

It is never too late to get insured for the reasons already mentioned: financially securing your loved ones, making up for lost income, paying off outstanding loans. So, despite the high premiums, it makes sense to have insurance even at this age. Like Jeevan shanti plan.