Life Insurance refers to a contract between a life insurance company and a policyholder. Under this contract, the insurance company promises to pay the beneficiary a certain amount of money as a compensation for the loss of life of the insured or after a specific period, in return for the policy premiums paid.
A Life Insurance policy provides financial support to the family of the deceased life insured by working as a life cover against the uncertain and unpredictable nature of life. Life insurance plans offer a lump sum amount to the beneficiary in case of death of the insured and a maturity benefit to those who survive their policy term.
Why Should You Buy a Life Insurance Policy?
ULIP Plan is a life insurance product that offers risk cover for the insured together with investment options to invest in some qualified investments like mutual funds, bonds, and stocks. As one integrated plan, the protection part and the investment part can be managed depending on the specific choices and needs.
In these plans, the investments are subjects to the risks associated with the capital market. The policyholder bears the investment risk on his/her investment portfolio. Hence, it is recommended to make an investment choice basis the needs along with the risk appetite.
Another factor that has to be taken into consideration by the policyholder is the future needs of the invested funds. Moreover, a unit linked plan is much more transparent. The charges including fund management charges, allocation charges etc. are clearly stated upfront.
Unit Linked Insurance Plan also allows its investors to switch their investment from debt to equity and vice-versa, without running from pillar to post and any worries of being charged.
ULIP plans were first introduced in India by Unit Trust of India (UTI) in 1971. This was followed by ULIP offerings from Life Insurance Corporation in 1989. Initially, a lot of investors shied away from investing in ULIPs due to the high charges associated with this insurance-investment product. However, in the recent times, major life insurance providers including Bajaj Life, HDFC, ICICI Pru, and Edelweiss Tokio came out with new-age ULIP products with bare minimal charges and multiple features to ensure maximum returns and comprehensive insurance protection for the investors.
In 2018, Union Finance Ministry reintroduced Long-Term Capital Gains (LTCG) taxes on equity-linked mutual fund schemes. Soon after the announcement, a large majority of life insurance companies started offering new-age ULIP plans as an alternative for equity-linked mutual fund schemes. In no time, ULIP plans started ranking alongside the most sought after investment instruments for investors with different risk appetite and budget.
There are certain basic and fundamental factors that must be considered while buying any Insurance policy scheme. Some of these factors that prove the vital necessity of buying a life insurance policy are mentioned below.
Ensuring Family’s Financial Security
A life Insurance Policy offers financial security and confidence to the beneficiary of the insured in case of any unfortunate event. The amount so received aids in solving some of the financial responsibilities of the dependent family members.
Repayment of Loans
The amount received through a life insurance policy can play a significant role in the repayment of outstanding debt that could be a burden on the beneficiary.
Assist in the Future Goals
Being a long term instrument of investment, life insurance policy matures after a specific number of years, and maturity benefit is paid to the beneficiary. The amount thus received can be utilized for fulfilling future goals of life such as retirement security or buying an asset like house or a car.
Economical Insurance Plans at a Young Age
The life insurance policy calculator available online shows that the policy premiums are low if the policy is purchased at a young age in comparison to buying at a later age.
Rebate While Filing Tax Returns
A life Insurance premium is eligible for Income tax rebate under section 80C that exempts the policy premium amount from the taxable income. The maturity proceeds received on policy completion or as death benefit are exempted from Tax under section 10(10D) of the Income Tax Act, 1961
Paying for the policy premium at regular intervals of time ensures that the policy stays in force and also leads to forced savings
Good health is a Prerequisite
In some cases, if the person is unwell, he/she might not be eligible to buy a life insurance policy. It is, therefore, imperative to buy a policy when health is at its prime and free from ailments. Once a policy is bought, additional riders can be bought separately as per the requirement of the policyholder
Peace of Mind
Buying an insurance policy lowers the financial burden on the policyholder as it lends assurance of financial security in case of loss of life of the life assured
Key Features of Life Insurance Policy
There are numerous Life Insurance policy schemes present in the insurance sector. With each policy having its characteristic features a policy comparison of the Life Insurance policy plans has given the following features of Life Insurance plans.
It ensures financial security to the nominee/ beneficiary in the form of a monetary assistance upon the death of the life assured. Some features of a term plan are:
- Life Cover: The main feature of taking a term plan policy is the life cover it offers at the lowest premium.
- Constant Premium: The premium amount of term insurance remains constant during the entire policy term.
- Long Period of Life Cover: A term plan option gives the policyholder a life coverage beyond 60 years of age. Some policies offer life cover till 99 years of age.
- Multiple Options of Payout: The beneficiary of a Term Plan Policy has the option to receive the policy payout as a single lump-sum payment or a recurring payment in monthly or annual payment mode or even a combination of both the payment modes.
- Critical Illness Benefit (Option): Some Term Plan Policies offer its policyholders the optional facility of a payout if any of the mentioned 34 critical illness is detected and that too without the need to produce any hospital bill supporting the claim.
- Accidental Death Cover (optional): Term Plan offers its policyholders the facility to add an accidental death cover anytime while purchasing the policy option or during the term of the plan.
- Terminal Illness Benefit: Certain Term Plans have the unique feature of providing the complete life cover amount before the death of the policyholder if any terminal illness is diagnosed.
- Premium Waiver: Some Term Plans have the feature of policy premium waiver in case of any permanent disability or death arising due to an accident.
Insurance Plans for Children
The main aim of a Child Insurance Plan is to secure a child’s future by assisting in accumulating a corpus that would meet the higher education/ marriage needs of children. Some main features of a life insurance policy for Children are mentioned below.
- Fund Selection: The child plans give freedom to the policyholder to select funds as per their choice that would generate a considerable corpus later.
- Flexible premium Payment Option: Premiums under this plan, can be paid once or at regular intervals as selected by the policyholder.
- Variety of Policy Benefits: In some Child Plans, features such as wealth booster and additional loyalty are available that increase the maturity amount received by the child in the case of any unfortunate event.
- Waiver of Premiums: In case of unfortunate death of a child’s parent after starting a child plan, under child policy plan the insurer waives off the payment of remaining premiums and gives them the lump sum death benefit. The company in some cases even makes the payment of the future premiums to secure the child's future
- Tax Benefit: Child Insurance Plans in some cases get tax benefit under Section 80C for the premium paid and under Section 10(10D) on the maturity amount received
Money-Back Insurance Plans
These plan options are a traditional insurance plan that offer savings and insurance benefits to the policyholder. Some main features of a Money Back Plan are as follows.
- Surplus Savings: A Money-Back plan gives the policyholder extra savings that assist in potential wealth creation over some time and in meeting the financial goals set for the future.
- Additional Income Source: The Money-back Plan provides an additional source of income that is available after a certain number of years, either on a daily or monthly basis, based on the payment mode selected. The amount thus received can be used to meet any critical expense of that time.
- Maturity Benefit: Similar to a traditional life insurance policy, a Money-back plan offers a lump sum amount at maturity that includes some bonuses as well.
- Tax Benefit: The policy premiums and maturity benefits are likely to be exempted under Section 80C and Section 10(10D).
Endowment Plan is an insurance plan option that offers savings with insurance coverage after a certain period. Some features of an endowment plan are as follows.
- Sum Assured with Steady Return: The main feature of an endowment plan is a maturity benefit paid after the policy term along with bonuses.
- Life Cover: Endowment policy provides a death benefit to the nominee/ legal heir of the endowment plan that is paid in the unfortunate event of the death of the life assured.
- Tax Benefit: The policy premiums are eligible for avail tax benefits under section 80C, and the maturity benefit or sum assured paid at policy completion is exempted under section 10(10D)
ULIP or Unit Linked Insurance Plans
A Unit Linked Insurance plan is a blend of life cover and wealth creation in a single insurance policy scheme. Under a ULIP plan, the policyholder's money grows at a faster rate while simultaneously offering protection with insurance. Some common features of a ULIP plan are as follows.
- Life Cover: Under a ULIP plan, the policyholder gets the maturity benefit on completion of the policy term, and the nominee gets the death benefit if the policyholder dies during the term of the policy.
- Selecting Funds: The policyholder can select the funds to invest the funds as per his risk appetite and future financial goals.
- Loyalty Bonus: ULIP plans offer a loyalty bonus at maturity that enhances the maturity benefit amount.
- Wealth Boosters: Some ULIP plans offer wealth boosters from time to time which is a percentage of the premium amount.
- Partial Withdrawals: ULIP Plans allow its policyholders to withdraw a particular portion of their money after five years of the policy term are completed
- Fund Switch: ULIP Plans give its policyholders the freedom to switch from funds between equity, balanced, and debt funds as desired by the policyholder without the switch having any impact on the tax benefit
- Investment Strategy: ULIP plans have specific investment strategies for their policyholders that are flexible and suit their needs. They can select from the lifecycle approach, systematic transfer, etc. to amplify their returns
- Return of Charges: Some ULIP Plans return policy administration charges and mortality charges that apply to maturity
- Tax Benefit: The policy premiums and maturity proceeds are eligible for tax rebate under Section 80C and Section 10(10D) respectively
Whole Life Plans
A Whole Life Plan is an insurance plan that offers assured death benefits during the lifetime of the policyholder. The life cover under this plan applies to the person assured is alive, and all policy premiums are paid.
Some features of a Whole Life Insurance Plan are as follows.
- Life Cover till 99 years of age: A Whole Life Plan provides an extended coverage till the age of 99 years.
- Dependents with Special Needs: This plan works especially well for people with many dependents and with long term goals, such as special needs of a children.
- Constant Premium: The premium amount under a whole Life Plan remains constant throughout the policy tenure or every stage of your life.
- Tax Benefit: The whole Life Premium offers tax benefit on the premium and maturity amount under section 80C and section 10(10D).
Benefits of Buying a Life Insurance Policy
The foremost benefit of buying a life Insurance policy is that it offers life cover and sum assured with maturity benefits.
In case of any unfortunate incident like the death of a policyholder, a life Insurance policy assures that the death benefit along with the bonus amount is paid to the nominee/ beneficiary.
Return On Investment
Life Insurance policies prove to offer high returns on investment with their risk-free, safe returns, bonuses, and many other benefits that are part of the policy schemes.
All insurance policies are benefitted under section 80C(policy premium), and section 10(10D).
A Life Insurance policy offers you the facility to avail loan as a percentage amount of the sum assured. This, however, might vary as per company policies.
Life Stage Planning
A life Insurance Policy helps in planning for the various stages of life such as child's education, higher studies, marriage, retirement plans, buying a home, or other essential occurrences.
Some Insurance Plans offer means to invest the money in the market and simultaneously leading to profitable wealth creation at maturity.
These are the additional benefits that can be bought with a life insurance policy for additional coverage. These include riders for critical illness, family income benefit, personal accidents, and some others.
Type of Life Insurance Plans
The Life Insurance policies available in the market are categorized as per their policy term, features, costs, and benefits. These categories are represented in a tabular form as below.
||Term (years) (Min/Max)
||Death Benefit (Min/Max)
||Maturity Benefit (Min/Max)
||10 - 35
||Payable to the nominee
||Insurance cum Investment
||Payable to the nominee
||Protection + savings
||Payable to the nominee
||Protection + savings
||Whole life or 100 years
||Payable to the nominee
||Policyholder reaching a certain age
||Return of invested amount
||Policyholders are entitled for regular pension
||Basic life insurance
||Payable to the nominee
While discussing life insurance plans, there are some frequently used terms that must be understood.
- Life Assured or Life Insured: It refers to the person whose life is insured or covered by the life insurance policy.
- Proposer: It refers to the person who makes the life insurance premium payment. The proposer and Life Assured can be the same person if an individual buys a policy for himself. If an individual buys an insurance policy for his family member as the life assured then the individual buying the policy would be the proposer.
- Beneficiary/ Nominee: A nominee refers to the person who would receive all policy benefits in case of loss of life of the insured and hand it to the rightful beneficiary. A beneficiary, on the other hand, is the person who receives the insurance payout and is the owner of the insurance proceeds. The beneficiary of a life insurance policy may be siblings, spouses, parents, children or even some trusts.
- Insurance Agent: An insurance agent is the representative of an insurance company who sells life insurance policies to different buyers. An agent puts forward the best policy plans, their features, and benefits and molds them to suit the buyer's needs. Their job is commission based and is paid a commission for each policy they sell.
- Insurance Aggregators: They offer a common platform to the buyers where they can check and compare the different life insurance policies and select a policy based on their needs. An aggregator provides an unbiased representation of data as they do not receive any commission for selling life insurance policies. They help the buyers by saving their money, time, and effort.
- Insurer: The insurance company selling life insurance plans is the insurer.
- Life Cover: It refers to the amount paid to the beneficiary in case of loss of life of the insured.
- Maturity Benefit: The amount paid by the Insurance Company at the completion of the policy term is called the Maturity Benefit.
- Death Benefit: The policy benefit paid to the nominee on the death of the life insured is the death benefit.
- Accident Benefit: the benefit offered to the life assured if he/ she meets with an accident in terms of medical expenses, hospitalization expenses, and other requirements as mentioned in the policy.
- Sum Assured: It refers to the amount that the insurer agrees to pay to the insured in case of any mishap.
- Premium: It refers to the amount paid to the insurance company at regular intervals for a selected number of years or once, as decided at the time of buying the policy from the policy options available, to receive the policy benefits.
- Premium Payment Term: It refers to the number of years for which the premium is to be paid to the insurer.
- Policy Term: It refers to the number of years for which the life cover will be valid.
- Free Look Period: The period after the policy issuance where the policyholder can cancel the policy, if the policy terms, conditions, or benefits do not seem satisfactory without bearing any canceling charges or penalty.
- Bonus: These are issued by the insurer to the policyholder, either at maturity or during the policy term, provided all the policy premiums have been made on time.
- Lapsed Policy: A policy whose premium payment has not been done on time becomes lapsed once the grace period for making payment also expires.
- Reinstatement: Once a life insurance policy gets lapsed due to non-payment of policy premiums on time, the policy can be again revived by making the payment of the due policy premiums. This process of reviving a lapsed insurance policy is known as reinstatement.
- Single-Premium Life Insurance Policy: It works like a regular insurance policy with the difference being in the policy premium which is done once as a lump-sum amount.
- Vesting Age: It refers to the age when the policyholders start receiving the policy benefits from the insurer.
- Underwriters: These are the people who analyze and evaluate the risk involved when issuing a life insurance policy. The risk evaluation of policy ends when the policy claim is settled starting from the time when the policy is issued.
- Exclusions: These are a very critical portion of a life insurance policy and refer to the parameters that are not covered under the policy; an insurer will not pay any benefit against them. An example of an exclusion is death by committing suicide.
What is Not Covered in Life Insurance Plans?
Insurance plans of each category are replete with several benefits that are beneficial for the life insured and to the nominee in case of death of the life assured. However, there are some loopholes that must be taken into consideration when purchasing life insurance policies.
- For each life insurance policy and its recurring premium payments, there are certain current expenses that are postponed or ignored to make timely payment of premiums.
Life insurance works in a manner to be beneficial for the nominee/ beneficiary and not for life insured
The surrender amount of a life insurance policy is quite low during the initial years of the policy term. If a policy is surrendered during this period, the policy owner, most likely, does not recover the premiums paid during those years
- In many cases, the person looking to buy a policy can be misled quite easily owing to his naivety or ignorance. This in some cases may even lead him to buy a high-cost insurance policy with coverage that far exceeds his requirement
- Age and health of the policyholder play a significant role in the life insurance policy premium. Increasing age, family medical history, personal health status, existing sickness, can lead to a potentially high premium amount for the policy
- Comparing online the best life insurance highlight the fact that Whole Life Insurance Plans are relatively costlier than the other policy plans owing to their life cover that lasts for a whole life
Tax Benefits of Life Insurance Plans
There are several tax benefits that apply to a policyholder when buying a life insurance policy. These Tax Benefits are appended under their respective headings.
Section 80C of the Income-tax Act -Deductions Applicable
Under section 80C of the Income Tax Act, Exemption up to Rs 1.5 lakhs can be availed through the Life Insurance policy premium. Some noteworthy points here are
- Tax deductions can be claimed for the policy premium of policies of self, spouse, and children. Children, in this case, can be independent, dependent, major, minor, unmarried, or married.
- HUF can also claim a deduction under section 80C through a life insurance policy.
- The insurance policy plans purchased through any insurance company/ insurer that has approval from the IRDA(Insurance Regulatory Development Authority of India) is valid for tax exemption under section 80C.
Some additional points that must be known while availing tax benefit through a life Insurance policy scheme are.
- For the life insurance policies that were issued before 31st March 2012, tax deduction can be availed on the premium amount up to a maximum of 20% of the sum assured.
- For the life insurance policies that were issued on 1st April 2012 or later, tax deduction can be availed on the premium amount up to a maximum of 10% pf the sum assured.
- For the Life insurance policies that were issued on 1st April 2012 or later in the name of an individual suffering from a disability as specifies in Section 80U or suffering from some specific ailment that is mentioned in section 80DDB, the highest deduction that can be availed is up to 15% of the sum assured.
Sum assured, as mentioned above, refers to the minimum amount guaranteed to the survivor under a given policy plan. This amount, however, does not include any policy bonus or premium that is to be returned.
No Tax Exemption Under the Following Cases
Any benefit received from a policy premium where the total premium is greater than 10% or 20% of the sum assured is eligible for tax.
TDS Applicable to Life Insurance Policies
- With effect from October 2014 if the payout from any life insurance policy, that is not covered under Section 10(10D) of Income Tax Act, exceeds Rs 1,00,000/- insurers shall deduct TDS at the rate of 1% before releasing the payment to the beneficiary.
- Bonus received would also be eligible for TDS.
- If the amount received is below Rs 1,00,000/-TDS shall not be deducted. However, the amount received by the individual will be completely taxable. Individuals can claim credit for the TDS deducted while filing Income Tax Returns
- As per the Union Budget 2019, it was proposed to amend the existing TDS on insurance payouts to 5% of the proceeds paid or payable on or after 1st September 2019.
Exemption Under Section 10(10D) of the Maturity Amount
Under section 10(10D) of the Income Tax Act, the maturity amount received for any insurance policy is eligible for tax exemption under section 10(10D). Whether it is a maturity benefit or a death benefit, any kind of maturity amount received by the beneficiary is eligible for exemption under the Income-tax Act.
There are, however, certain factors that must be known regarding tax exemption under section 10(10D).
- Barring death Benefits, maturity benefits received for policies issued on or after 1St April 2003 and on or before 31 March 2012 are not exempted from tax
- For Policy plans that were issued on or after 1St April 2012, tax exemption is valid if the consolidated premium paid is not more than 10% of the sum assured
- For maturity benefits received under the keyman insurance policy, tax exemption under section 10(10D) is not valid. Keyman Policy refers to the policy that was offered to companies and corporates that wanted to offer this cover to their key people. In these cases, the death benefit was paid to the company
- Benefits received by disabling people of dependent handicapped through a life insurance policy are not exempted under the tax. This is due to Section 80DD(3) and 80DDA(3), which highlights that if the handicapped person faces death before the proposer making premium payments, the amount thus paid is treated as income and taxed accordingly.
Steps to Buy Life Insurance Policy Online
A Life Insurance Policy can be bought by visiting any IRDA approved insurance company, contacting a government and IRDA approved insurance advisor, or purchasing an online policy. To get a life insurance policy through a convenient, cheaper, and hassle-free way, buy online life insurance plans and avail the same benefits.
Buying an online policy of life insurance has the following benefits:
- Instant Process: The process of buying a policy is quick and simple, and the applicant receives the policy instantly.
- Transparency: Online buying offers complete transparency of all the policy features, benefits, bonuses, and costs involved.
- Cheaper: Buying an online insurance policy proves to be cheaper as it reduces the manual work and physical paperwork required.
- Easy Comparison: Online comparison of the life insurance plans of various companies makes it quite easy to ensure that the best life insurance policy is bought with optimum benefits.
- Convenient Online payment: The payment of online insurance policy is made through an online and convenient payment which is entirely secure and safeguarded.
When planning to buy an insurance policy online, it is imperative to make a thorough comparison of the available life insurance policy plans existing in the market before selecting the plan that matches the requirements of the prospective buyer. Keep in mind to check the riders available with the plans and select a plan that offers maximum benefits, riders, cover at a minimum premium cost.
Once this is done, the buyer must visit the online website of the insurance company whose policy he has selected, enter his details such as age, gender, and annual income. Fill the form with all details as mentioned in the form, make payment through a secure online gateway using either credit card/ debit card, net banking, or other available options.
Once the payment is successful, the transaction is complete, and the policy details are sent to the policy holder’s registered address.
How to Compare Life Insurance Plans?
Buying a life insurance policy involves the consideration of several crucial factors. It is, therefore, prudent to compare the various life insurance plans existing in the market before selecting the insurance policy that is best suited to the needs of the prospective policyholder.
Some factors that might prove helpful in selecting the best life insurance policy are mentioned below:
Analyze the Policy
It is advised to keep a tab on the requirement of the family from time to time. As with significant life events such as marriage, job change, the birth of a child, etc. insurance requirements keep varying.
Check the Policy Coverage
A complete analysis of the family income, expenses, surplus funds, future financial planning, retirement funds, loans, etc. must be done to know the exact life covered that would best suit the family needs.
Confirm the Premium Payment Capacity
Individuals must mandatorily check and reconfirm their premium paying capacity before beginning an insurance plan. This ensures a regular and timely payment of policy premiums, beneficiary getting policy benefits and avoidance of any policy lapse situation.
Make a Comparison with Different Insurers
Comparing the policy quotes of all policy plans that provide similar benefits and features would help in selecting the most feasible plan with maximum benefits. This proves simpler when an insurance policy is bought online.
Refrain from Blindly Adding Riders
Riders are available with life insurance plans having different benefits. However, it is recommended to take an additional rider only in the case it provides a feature that meets the set financial goals and life cover and avoids adding on riders without complete clarity and understanding.
Read the Complete Policy Document Carefully
A policy document is the most crucial document that must be read and understood to avoid any misunderstandings and unpleasant situations later.
Comparing Policy Features
It is advised to select policy plans that offer tailor-made plans and can be molded as per customers' requirements. Features such as premium paying mode, policy tenure, payout, and sum assured are the significant factors to be considered.
Claim Settlement Ratio
Another significant factor that must be considered while finalizing a policy plan is the claim settlement ratio of the life insurance company. This ratio is different for each company and varies each year.
Top Life Insurance Companies in India
Selecting the best life insurance policy among the innumerable life insurance policies existing in the market is a complex task for the prospective policy buyer. The below list of top life insurance companies of the country that must be checked when deciding to buy an insurance policy:
Life Insurance Corporation of India
Life Insurance Corporation of India (LIC) is a Government-run insurance company which was established in 1956. With a claim settlement ratio of 98.33% for the year 2017-2018, LIC is a popular and trusted choice among people looking for reliable insurance companies
ICICI Prudential Life Insurance
ICICI Prudential Life Insurance Company is a famous life insurance company. Counted among the best insurance companies in the private sector, it had a fantastic claim settlement ratio of 97.88% in the year 2017-2018. Its feature of offering customized insurance plans to its customers keeps customers satisfied.
SBI Life Insurance
Catering to the needs of a large number of population, SBI Life Insurance offers life insurance plans in three main categories of online plans. The versatility of products makes it another popular choice among people.
HDFC Standard Life Insurance
Another private insurer of the country that offers tailor-made insurance plans to the people is HDFC Standard Life Insurance Company. A high claim settlement ratio of 95.02% for the year 2017-2018 is another reason for the company’s popularity.
Max Life Insurance Co. Ltd
Having sold several million insurance policies to Indians with a high claim settlement ratio of 96.95% for the FY 2017-2018, max Life Insurance Co. Ltd offers varied insurance products that are available at budget-friendly rates.
Tata AIA Life Insurance Co. Ltd
With a claim settlement ratio of 96.8% for the FY 2017-2018, TATA AIA Life Insurance Co. Ltd is working since 2001 to offer life insurance solutions to people.
Bajaj Allianz Life Insurance Co Ltd
A highly trusted and popular brand in the insurance sector of the country. Bajaj Allianz Life Insurance Co. Ltd has a claim settlement ratio of 91.30% for the FY 2017-2018.
Reliance Nippon Life Insurance Co Ltd
Rated as one of the best insurance companies of the country, Reliance Nippon Life Insurance Co. Ltd offers a host of insurance policy plans for its customers that suits their various needs. The claim settlement ratio of the company is 93.82% for the FY 2017-2018.
DHFL Pramerica Life Insurance
A leading name in the financial sector, DHFL Pramerica Life Insurance, has a host of plans that match the requirements of the prospective policyholders. A high claim settlement ratio of 97% for the FY 2017-2018 signifies the significant performance of the company in claim disbursal.
Canara HSBC Oriental Bank of Commerce Life Insurance Co Ltd
Established in the year 2008 with the collaboration of some big nationalized banks like the Canara Bank and Oriental Bank of Commerce with HSBSC Insurance Holdings Ltd. The company is a leading name in the insurance sector owing to its customized insurance plan that is molded as per customer’s requirements.
Riders Available With a Life Insurance Policy
Riders refer to the additional benefits available with the life insurance policy offered by the insurer. The riders are of many kinds, and each rider serves a separate purpose. The selection of the rider that would suit a given policyholder's requirement is the key factor that must be considered when buying riders.
A vital point worth mentioning is that riders are additional benefits, which should be bought depending on one’s requirement after carefully considering all factors.
Some riders available for policyholders are as below.
Critical Illness Rider
This rider provides cover to the policyholder against critical ailments such as heart attack, cancer, kidney failure, coma, stroke, paralysis, etc. The list of critical ailments covered by insurance companies may vary and must be checked with the respective insurance companies before taking the rider.
Accidental Death Benefit Rider
In this rider, the nominee will get the policy benefit if the policyholder’s demise is due to an accident. In some cases, the policyholder may die after many days of the accident. Even in such cases, the nominee gets the accidental death benefit along with the sum assured.
Waiver of Premium Rider
If the life insured is unable to make policy premium payments due to an unforeseen disability and loss of income source, the life insurance policy gets terminated with no benefit to the insured. In such a scenario, the waiver of premium rider waives off all future premiums and ensures that the life insurance policy remains in force and active.
Accidental Total and Permanent Disability Rider
Under this rider, if the insured is unable to earn any income owing to total permanent or temporary disability, the riders provide financial aid to the insured delivered in the form of a monthly income.
Under this rider, the insured gets an additional death benefit in case of unforeseen and premature death of the insured. This benefit is paid either as a lump-sum payment or in monthly installments.
Surgical Care Rider
Under this rider, a lump-sum payment is made by the insurer if the insured has to undergo any surgery performed in India. The surgeries covered under this rider may vary from company to company.
Hospital Cash Rider
This rider assures a guaranteed amount paid to the insured in the event of any unforeseen or unplanned hospitalization. The rider benefit, in this case, may vary for different companies.
Life Insurance Faqs
Ans: Life insurance is essential as it covers the family against any unforeseen financial emergency arising due to loss of life. Thus keeping the family financially secure and helping to meet long term financial goals.
Ans: There is no specific amount for this. However, as a general standard, a life insurance cover should be taken for almost 10 times the current salary keeping in mind the standard of living, other income sources (if any), expenditure graph, etc.
Ans: There are various modes for making the policy premium payments. These include yearly, half-yearly, quarterly, monthly, and lump sum. Based on the convenience of the customer, the premium payment mode can be selected.
Ans: Most insurers selling life insurance policies offer a grace period of 30 days after the policy premium paying date has expired. If the policyholder, due to any reason, fails to pay the policy premium even during the grace period, the life insurance policy becomes defunct or lapses. If, however, the policy premiums are paid after the grace period, the policy is revived.
Ans: There is no specific time considered as the right or ideal time to buy a life insurance policy. However, the sooner a life insurance policy is bought, the higher are the benefits. Since at a younger age, expenses are less, health is in good condition, and finances are strong. Another factor to be considered is the policy premium, which is less at a young age and keeps increasing with rising age.
Ans: The maximum age for insurance plans varies for each insurer and the specific plan. However, the maximum age limit that is generally set for most insurance plans falls between 70-80 years.
Ans: The death benefit is paid to the nominee or legal heir of the life assured after the death.
Ans: The nominee of a life insurance policy does not get any benefit if the life insured commits suicide within one year of taking the policy. However, the insurance company pays the policy premium amount received up to that day after deducting the processing fee, administration charges, and service charges.
Ans: Cash value refers to the monetary amount offered to a policyholder, in the case of policyholder canceling the policy. The policyholder in this scenario has to forego all future rights and benefits of the life insurance policy.
Ans: When a policyholder fails to pay the policy premiums timely, the policy becomes defunct, and the amount of sum assured is reduced. The reduced sum assured amount is known as the paid-up value.
Ans: The term plan does not give any money back after the policy.
Ans: If in a policy, the primary beneficiary is dead, or declines to receive the policy benefit, or is unable to receive the policy benefit due to some other reason, the death benefit of the life insurance policy is paid to the contingent beneficiary.
Ans: Yes, the policy benefits are paid to the nominee in this case.
Ans: In this case, the nominee details can be changed. If this is not done, the legal heir or estate becomes the default nominee.
Ans: The life insurance policy benefits are paid as per the payment mode selected by the policyholder. In some plans, the nominee has the choice to select a policy benefit payment mode as per his requirement or convenience.
Ans: TPA or Third Party Administrator is a licensed agency that is approved by the Insurance Regulatory and Development Authority of India. They process life insurance claim requests. They also offer the cashless facility to the insured on behalf of the insurer.
Written By: Paisawiki - Updated: 01 July 2020