Life insurance guarantees that in the event of the insured’s death, the insurer will pay a sum of money to the insurer’s beneficiaries, which is the return for the premiums paid by the policyholder during his lifetime.
Life Insurance is described as an agreement or settlement between an insurance corporation and a policyholder. The insurance corporation guarantees to pay a lump sum of money in trade for a premium, upon the policyholder’s unlucky dying or after a fixed period.
What is a Life Insurance Policy?
In the life insurance policy, the insurance company offers financial insurance to the insured person and pays a certain amount to the nominated beneficiary in case of any unfortunate event of the insured person’s death. In trade, the policyholder has the same opinion to pay a predefined amount of cash as a premium both regularly or as a single premium. If included by the coverage, insurance will be provided for crucial illnesses as well! Since it offers better insurance coverage, it draws a more significant life coverage premium.
Key Features of Life Insurance Policy
| Key Features | Benefits Offered |
| Death Benefits | Available below are complete life coverage, term insurance, endowment plans, and ULIPs. |
| Investment Component | Available under Term, ULIPs, and endowment plans. |
| Maturity Benefit | Available under full life insurance, ULIPs, and endowment plans. |
| Riders / Add covers | A range of rider benefits or add-on covers is available for all the existing coverage plans. |
| Coverage against Various Liabilities | Most of the policies give insurance against numerous policyholders’ liabilities like mortgage loans and different kinds of debts. |
| Tax Benefits | Available under all kinds of life coverage plans |
| Buying Process | Online and Offline |
| Claim Process | The easy online and offline claim process |
| Physical Paperwork | Only in case of offline coverage purchase |
| Claim Assistance | Available |
| Premium Payment Term | Single Regular or Limited |
| Payout Options | One Time Payout One Time Lump-sum Plus Fixed Monthly Payouts, and One Time Lump Sum Payment Plus Increasing Monthly Payouts |
Benefits of Life Insurance
Life insurance has many advantages. Here are some of the key features and coverage that life insurance offers.
Most people use life insurance to provide cash to beneficiaries who experience financial difficulties after the insured’s death. For wealthy people, however, the tax benefits of life insurance, including tax-deductible cash appreciation, tax-free dividends, and tax-free deaths. It has advantages; it can offer additional strategic opportunities.
The perks of purchasing life insurance coverage are beyond shielding the policyholder’s family in tough times. Undoubtedly, there is a need for a breadwinner to protect their dependents in case of their unfortunate and premature death. It can cause a lack of income—has stated that there may be an extended listing of different benefits that make it a must-have. Sadly, most people aren’t aware of the various advantages provided by a life plan. All they care about are the demise and disability advantages. However, life policies provide many different advantages, such as maturity advantages, tax advantages, etc.
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Serves as security for a loan
To this day, many people do not know that life insurance can also serve as security for a loan. Insurance policy and the surrender value, the policyholder can opt for a loan from a bank or NBFC (Non-Bank Financial Company) under the applicable conditions. Loan Amount: Generally, the loan amount is a percentage of the life insurance residual value, and it can go up to 90%. Few companies will only allow a loan of up to 50 percent of the total amount of the premium paid by the insured. -
Serves as security for a loan
To this day, many people do not know that life insurance can also serve as security for a loan. Insurance policy and the surrender value, the policyholder can opt for a loan from a bank or NBFC (Non-Bank Financial Company) under the applicable conditions. Loan Amount: Generally, the loan amount is a percentage of the life insurance residual value, and it can go up to 90%. Few companies will only allow a loan of up to 50 percent of the total amount of the premium paid by the insured. -
Online Payment Discount
Most people are unfamiliar with the online payment benefits (the payment method one person chooses affects the insurance premium dramatically). A person chooses to pay their premiums online. This is because there is no paperwork involved. In addition, the life insurer can save many commissions that are paid offline to agents for the Purchase and renewal of life insurance -
Discount according to the chosen payment period
Almost all life insurers offer their policyholders different payment periods annually, every six months, annually, quarterly or monthly. If an insured person chooses to pay the insurance premium annually, the company can use this for investment purposes, which automatically means more profits and benefits. If the insured person chooses the payment plan, this discount is often already included in the premium rate of the life insurer. -
Taking care of Business
Some life insurers offer an option to policyholders who own a business. If an Insured disappears, their business partners can easily buy the Insured’s share. In this scenario, all the counterparty needs to do is sign a contract with the life insurer, and the payment received after the insured’s share sold is paid out to their survivors. It is essential to understand, however, that the nominee or dependents of the insured will not receive any stake in the company. -
Tax Benefits
To pay a life insurance premium, a policyholder is entitled to a tax refund under Section 80C of the Income Tax Act 1961. Regardless of the person, spouse, or children, the premium paid by parents and in-laws is exempt. All life insurers offer this service, be they private life insurers or public life insurers.
All life insurers offer this service, regardless of whether they are private or public life insurances. In addition, the expiry of life insurance is tax-deductible according to 10 (10D) of the Income Tax Act 1961.
Best Life Insurance Plans
Some of the best life insurance plans are given below-
| Insurance Plan | Entry Age (Min) |
Policy Term (Minimum/Maximum) |
Sum Assured (Minimum/Maximum) |
| Aditya Birla Sun Life Shield Plan | 18/65 years | 10, 20/30 years | Rs.25 lacs/no upper limit |
| Aegon Life i- term Plan | 18/75 years | 5/40 years | 10 Lacs/no upper limit |
| Aviva Life Shield Advantage Plan | 18/55 years | 10/30 years | Option A – 35 Lacs/ no upper limit Option B- Rs.50 lacs/ no upper limit |
| Bajaj Allianz i- Secure | 18/70 years | 10/30 years | 20 Lacs/ no upper limit |
| Bharti Axa life premium Protection plan | 18/65 years | 10, 15/35 years | 25 Lacs/no upper limit |
| Canara HSBC iSelect + Term Plan | 18/65 years | 10/30 years | Rs.25 lacs/no upper limit |
| Edelweiss Tokio Life Simply protect plan | 18/65 years | 10/40 years | Rs. 25 lacs/no upper limit |
| Exide Life Elite Term | 21/60 years | 10 to 40 years | Min SA: Rs. 5OL: Max SA: Rs. 10 Cr |
| Future Generali Flexi Online Term insurance | 18/55 years | 10/75 years | Rs.50 lacs/no upper limit |
| HDFC Click2protect Plus | 18/65 years | 10/30 years | 10 Lacs/10 Crores |
Types of Life Insurance
There are many different types of life insurance to suit all types of needs and preferences. According to the short-term or long-term needs, you can choose between temporary or permanent life insurance.
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Term life insurance
Term life insurance has a fixed term of years and then ends. You choose the term when purchasing the policy. Usual terms are 10, 20, or 30 years. The best term life insurance policies combine affordability with long-term financial strength. -
Degressive term life insurance
The degressive term life insurance is an extendable term life insurance with coverage that decreases during the policy term at a predetermined rate. -
Convertible Term Life Insurance
Convertible Term Life Insurance enables policyholders to convert term life insurance into permanent insurance. -
Renewable Life Insurance
This is annual renewable life insurance that provides an offer for the year the policy is taken out. The premiums rise annually, and it is usually the cheapest term life insurance. -
Long-term life insurance
Long-term life insurance remains in place for life unless the policyholder stops paying the premium or terminates the contract. Usually, it is more expensive than the term. -
Whole Life Insurance
Whole Life Insurance is a type of permanent life insurance that builds up cash value. Cash-value life insurance allows the policyholder to use the cash value for many purposes, such as a source of credit or cash or to pay insurance premiums. -
Universal Life Insurance
As long-term life insurance with an interest-bearing present value component, Universal Life Insurance is characterized by flexible premiums. Death benefit. -
Universal Indexed Insurance
This type of universal life insurance policy allows the policyholder to get a fixed or stock indexed return on the present value component. -
Universal Variable Insurance
With variable universal life insurance, the policyholder can store the present value of the policy in a separate available account. It also has flexible premiums and can be designed with a uniform death benefit or an increasing death benefit.
What is a Life Insurance Premium?
A life insurance premium is a payment that must be made to receive life insurance benefits. The premium is paid annually; However, the payment method of the premium can be chosen between monthly or half-yearly. This premium also helps to increase the cash value of the insurance. The insurance company determines the premium that the insured person has to pay to the insurance company. The buyer can choose the contract term, and the sum insured. When calculating the sum insured, the insurer considers various factors such as your lifestyle, job, number of relatives, finances, sum insured, etc. No premium calculator can calculate the value of human life.
How to Choose the Best Life Insurance?
Life insurance companies in India offer different plans. Sometimes it becomes a chore to choose the best plan from several options and get the same with the best coverage and an affordable premium.
Here are some essential tips to help you choose the best life insurance policy:
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The reputation of the provider
Today the market is flooded with insurance companies offering various life insurance plans. This means that there are also providers in the insurance industry who are not up to date or new to the business. So choose an insurer that is recognized on the market, has proven itself, and, above all, meets your insurance requirements. -
Claim Settlement rate:
The intention of taking out life insurance is to obtain a claim if necessary.But what if the claim you submitted doesn’t go anywhere? So, before choosing the insurance company, be sure to check the company’s claims settlement rate. This essentially gives you a better idea of how many claims the company receives and resolves in a year. The company with the highest claims ratio is the safest option. -
Calculation of the sum assured:
Before you knock on the door of an insurance company, it is advisable to calculate the expected sum insured. In addition, you will also get an idea of the premium calculation that insurance companies perform. Which company is right for you, combine both factors, and you get your answer and an informed decision. -
Customer reviews:
Last but not least. Get in the habit of reading customer reviews online. Reading these comments will help you make the right decision. In addition, if you have any doubt, dilemma, or need clarification, simply contact the Insurance Company’s customer service department, who will also help you understand a particular company’s effectiveness in dealing with customers.
How to File a Life Insurance Claim?
Filing a claim and getting the assured amount can be easy if all the necessary steps are taken. It is essential to have the right way to file a claim. The nominees of the policyholder or policyholder can file a claim in India under the following situation:
- Upon the demise of the policyholder
- Upon maturity of the policy
How to File a Claim In Case of Demise?
To file the claim, you have to-
Inform the Insurance Company:
- Contact the insurer as soon as possible on their Contact number or inform them by writing an email.
- It is always preferable to inform the insurer directly over a call to initiate the process.
Share Important Details:
The beneficiary or the claimer, while lodging a claim with the life insurer, needs to share all the necessary details like:
- Policy Number
- Name of the policyholder
- Place of death
- Name of the claimant
If the policy has been purchased offline, then the insurer had a claim intimation form at the policy purchase. If it is an online policy, Directly apply for the claim settlement through the claim form online.
Claim Processing
In case of accidental or natural death, the beneficiary or the nominee must submit all the supporting documents to the life insurer as a part of the claim process. The claim support team verifies the insurance documents and claim declaration.
Documents to be submitted
- Original copy of the policy
- Duly filled claim form
- Death certificate of the policyholder
- Deeds of assignment, if present.
- The discharge form was signed by the witnesses of the incident.
- Supplementary documents like post-mortem reports, hospital certificates.
- The investigation report in case police inquiries had happened.
Approval and Payout
- Once all the documents are submitted, and the life insurer has verified them, the insurer will settle the claim.
- The life insurer can ask for the beneficiary’s bank details – a canceled cheque or a copy of the bank statement, account passbook.
- For nominee’s identity proof, a copy of passport, voter identity card, PAN card, Aadhaar card’êtc. It is necessary to be submitted.
- Generally, the claim settlement process takes 30 days. Once it gets approved, the insurer may immediately make the payout.
- Some insurers make the payments through the Electronic Clearance Service or ECS, an alternative method to make bulk payments.
How to File a Claim for Maturity?
If the insured outlives the policy term, they will be eligible to avail of policy maturity benefits. However, the Insured must make sure the policy is ongoing and that all the premiums have been duly paid.
When a policy reaches maturity, the company informs the policyholder at least 1-2 months in advance about the maturity date, amount, and discharge voucher.
The policyholder must sign the discharge voucher (similar to a receipt) in the presence of the witnesses. The voucher is then sent back to the insurer at the side of the original coverage bond, on the idea of which the coverage maturity advantages are provided.
In case the policyholder has nominated another man or woman, or entity for the coverage. The nominee must sign the release voucher to the insurer to obtain the declared amount.
Life Insurance Riders
Life Insurance riders add on to the benefits given by the insurance company and improve the base coverage. But, before opting for the riders, you must know different types of riders and their roles. It is important to choose the right rider to get the best out of your life insurance.
Types of Riders
Here, we will talk about 4 types of Riders.
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Critical Illness Rider
These riders cover critical illnesses like cancer, kidney failure, coma, etc. Different insurers give different coverage, so it is important to check the list of illnesses covered by your insurer. No, any insurance company provides a 100% guarantee against critical illness, here are the category of people who can opt for this rider:
Officers working under extreme conditions.
Chain smokers
People living an unhealthy lifestyle -
Accidental Death Benefit Rider
In case of accidental death, the nominee receives the total sum insured along with additional accidental death benefits with the help of this rider. In many cases, when the insurer doesn’t pass away immediately after the accident, the policy companies set a period to extend the offered coverage. It is important to read all the clauses of the policy documents before applying for any policy or opting for a rider. This rider is best for those who: Travel by bike, car on a daily basis.
Go on business trips regularly. -
Accidental Total and Permanent Disability Rider
In case, if the insurer becomes disabled due to an accident, this rider will help them financially by providing monthly income to the family. The benefits of these riders vary from plan to plan. This is beneficial for those who- Travel regularly via bike or car.
Work on civil sites.
Life Insurance – FAQ
Q1. What is Lifestyle Insurance?
Ans. Life insurance is an agreement between you and the coverage company. The insurer consents to pay the policy benefits for your nominees in case of demise.
Q2. Why is Life Insurance Beneficial?
Ans. Life cover is beneficial to ensure the financial balance of your family in case you aren’t capable of earning due to an accident or illness. The policy also will pay the benefits of the amount to your beneficiaries. Such insurance ensures that your family can satisfy their expenses and sustain their lifestyles even in your absence.
Q3. Is Life Insurance Necessary?
Ans. Purchasing a policy is an intelligent investment decision. This is especially if you have dependents, including spouses, parents, and children. The life plan will provide economic security for your family if you aren’t around. Moreover, life policies offer numerous benefits and are a bendy instrument. Some of those encompass the power of including riders for more excellent insurance or withdrawing a part of the collected corpus to fulfill charges such as children’s schooling or wedding.
